Thinking about what would happen if you were to become seriously ill or even die is not something most of us want to give much time to. Going so far as to get your finances in order, should the worst happen, is certainly a bridge too far for many. But having the right protection in place is so important. How will you manage if you lose your income for a long period of time? How will your loved ones pay for the house, the bills and food shopping if you die? It can and does happen so why not sign yourself up for a big old dollop of Peace of Mind and get yourself and your family protected.
OK, so now that we’re past the morbid bit let’s think about the different types of cover that are on offer. Of course there are many variants but essentially they tend to fall into three main categories.
- Income Protection – If you have an accident, get seriously injured or become very unwell and you can no longer work, this will pay out until you retire, die or are well enough to return to work. In a nutshell, it will pay a large chunk of your wages, if your employer stops paying them, so that you can cover your rent/mortgage, bills, groceries etc.
- Life Assurance – When you die (yes it happens to all of us!), this will pay out a lump sum to your loved ones (either in one dollop or spread out as monthly payments). You pay in whilst you’re alive and your loved ones benefit after you’re gone. How much you pay in will determine how big that lump sum is.
- Critical Illness Cover – Should you become unwell and no longer be able to work, this type of policy will pay out a lump sum on point of diagnosis. The policy you take out will cover a list of conditions and illnesses, the better the policy the more diagnoses will be covered.
So those are the main options. You don’t necessarily need them all, you might feel that one form of cover is enough for you or perhaps a combination of two different types. Without decent advice, it’s very easy to make mistakes when choosing your cover. Here are the 3 main traps we’d hate you to fall into.
- Picking a random amount of cover – ‘Ah yes, £250,000 sounds like a lot of money, I’m sure that would cover everything if I couldn’t work or if I died’. Maybe that is enough for you, but it’s important to think it through. Look at your monthly expenditure, talk to your partner, think about your children. How long will that money keep you and your family going at an already very difficult time?
- Picking a random Term for your cover – It’s tempting to go for a policy that lasts until you’re 65 or adds up to a nice round number but does this really reflect what you need to cover? Think about how long you will need to pay monthly costs for your children, how long you expect to be working for or whether there are likely to be any major changes to your cost of living or income as you move through the different stages of your life.
- Covering your mortgage/rent but forgetting about your monthly income – Of course, if you die, it will be a huge relief to your loved ones to know that the mortgage is paid off or the rent is covered, but what about the other monthly costs? Food, bills, clothing, little Betty’s dance classes? Ideally, you want your family to be able to carry on with life as best they can so it’s worth considering all these monthly expenses when you’re choosing your policy.
It all sounds very expensive?
Yes. If you want all the different types of cover and huge lump sums and everything paid for forever more, insurance can get expensive. It’s all about finding a balance and the right types of cover for you and your family. The best advice I can give is talk to people. Ask your friends and family what cover they have and why they have chosen it and get professional advice so that your insurance can be tailored to your individual needs.
We’re always here to chat it through with you so give us a call or drop us an email or find someone else you can trust to advise you, but whatever you do, don’t put it off any longer!