Protection
Whole of Life Insurance
Whole of life plans, also known as life assurance, give you cover for your entire life. When you die a lump sum can be used to meet your debts or can be left to someone.
Key Feature of Life Insurance:
- Whole life insurance lasts for the lifetime of the policy holder, as opposed to term life insurance, which is for a specific amount of years.
- Most whole life policies feature level premiums, meaning the amount you pay every month won’t change.
The amount of life insurance you need is unique to your personal circumstances. For instance, if you are single, without any children and no debt, you may not need a large payout. You'll need to consider how much you might need to pay off if you have a partner, children, a mortgage and other debts.
You should also check if you have any other types of automatic life cover in place. For example, your employer might offer a death-in-service payout. This is usually 3-4 times your salary. This amount might be enough life cover if you are single and have no debts.
Whole of life insurance policies last until you die, they are permanent and don’t have an expiry date. This means you don’t have to worry about buying a new policy or extending your existing one if it’s nearing the end date.
Term Insurance
Term insurance gives you life cover over a pre-agreed period of time. If you die during this period, your policy pays out a lump sum. This type of cover is useful for providing financial security for your dependents.
Types of Term Insurance available:
- Level Term Insurance
Your life cover stays the same and your premiums are fixed unless it is reviewed. Reviewable policies tend to be cheaper to buy.
- Decreasing Term Insurance
Life cover decreases during the term of the policy, which reduces the cash payment the longer the term runs. This type of insurance is useful if you need to cover a reducing debt such as a repayment mortgage. It is usually less expensive than a level term assurance.
- Increasing Term Insurance
The premiums and cover will increase during the term of the policy. This can be used to keep in line with inflation or to cover an increasing debt.
Critical Illness Cover
Critical illness cover gives you financial protection against certain illnesses and medical conditions of a specific severity.
Your cover will provide you with a tax-free lump sum cash payment which can be used to help you and your family. For example, it could help you pay off your mortgage, pay for treatment to help you recover or pay your household bills.
All Critical Illness policies cover the following illnesses providing they are of a certain severity:
- Cancer
- Heart attack
- Stroke
Covers varies between insurers and some policies include additional medical conditions, so check the details of your policy with your insurer.
Income Protection
Income Protection Insurance helps support you financially if you have time off work and suffer a loss of earnings because of injury or illness.
This type of insurance covers most illnesses that leave you unable to work due to illness or injury, including a stress-related illness, mental health or a physical health condition. Income Protection Insurance does not pay out if you are made redundant.
You can apply for Income Protection if:
- You work in full time employment.
- You work in part time employment.
- You are self employed.
Most policies have a pre-agreed waiting period. This is also known as the ‘deferred’ period. The waiting period is the time between being unable to work and the time at which you will begin receiving payments.
Having an income protection policy will mean that you can continue to pay your bills, rent or mortgage if you are unable to work.
Family Income Benefit
Family Income Benefit Insurance is a policy that pays out a set monthly amount in the event of your death. Like other insurance policies, it’s typically a fixed term policy, but the payout is received monthly as opposed to a lump sum.
Some find it more straightforward to calculate the level of cover they need for family income benefit instead of a lump sum life insurance policy, by assessing what they need for their family to be financially secure on a monthly basis.
One of the advantages of Family Income Benefit is the reduced hassle that comes with managing a lump sum payout. With a smaller, more regular income, it can be easier to manage money on a monthly basis, as opposed to ensuring a lump sum payment lasts for the required period of time.
This can be particularly comforting at a stressful time. If a claim needs to be made, it’s often a distressing time when the family experiences grief. Family Income Benefit allows the family to focus on supporting one another, instead of worrying about money issues.
Family Income Benefit is paid tax free. This is why it’s important to calculate your monthly income on take-home pay, rather than gross salary to ensure you’re not overpaying on your premiums and receive a suitable amount of cover.