When you need income protection and life insurance – plus what you can spend it on
IT is hard to plan for getting ill or losing your job but there are steps you can take to ensure you and your loved ones are looked after if the unexpected happens.
Financial products such as life insurance, income protection and even private medical cover can provide important financial payouts so your bills are still settled if you are ill and even if you pass away.
- Find the policy for you at Assured Futures – here
Here is how these insurance policies can help you prepare for tougher times and when you may need them.
Households have been tackling soaring energy and food bills recently as well as more expensive mortgages and rent as the rate of inflation remains high and interest rates rise.
Coping with these bills can be tough at the best of times but if you could no longer work due to an illness or injury, or even if you died, how would these costs be covered?
Insurance products can provide an important backup in these extreme situations to ensure you and your loved ones can still afford to pay the mortgage, feed the family and keep the lights on.
- Find a range of policies available at Assured Futures – here
Life insurance
Life insurance is a type of cover that pays out a lump sum to your dependants, usually, your partner or children, if you die during the term of the contract.
When you set up the policy, you will need to decide on what the payment should be, reflecting your living costs and bills such as the mortgage.
You will also need to pay monthly premiums, determined by a range of factors including your age, health and lifestyle.
There are different types of insurance.
Term assurance covers you for a fixed period and can either pay a set amount – known as level term – or a figure that reduces – decreasing term assurance – typically alongside a debt such as a mortgage.
Another option is an inflation-linked cover which increases in line with the cost of living so the payout reflects the changing cost of goods and services. Your premium will also increase in line with inflation to cover the higher cost.
There is a risk with term assurance that you will no longer be covered if you outlive the policy.
Another option is whole life insurance that covers you regardless of when you die but the premiums can be higher and you could be paying for longer.
The payout is usually tax-free and can be used in many different ways such as paying off a mortgage, covering funeral or inheritance tax costs, helping towards bills or proving a nest egg for those you leave behind.
These policies tend to be most suitable for homeowners as you can use it to pay off the mortgage, while parents can also make use of the product so their children are looked after.
It may not be as useful for someone who isn’t married or doesn’t have any children as there is no one else depending on you if you die.
Some people may only start to think about life insurance as they get older.
There is an over-50s life insurance product, which as the name suggests can be taken out by people from age 50 and up to age 79.
People on low incomes or small savings pots who may not have been able to afford the product in the past can make use of over-50s life insurance and start paying premiums so they know there is some money left once they die.
The advantage of an over-50s policy is that it is “guaranteed acceptance” and you don’t have to answer any medical questions.
However, to manage the risk the level of cover is limited and there is a one or two-year qualification period before you can make a successful claim
It can work for many people over the age of 50 because their health may have deteriorated or they would prefer not to answer medical questions.
Find the right policy for your needs at Assured Futures.
Income protection
You can also get insurance to cover you if you cannot work due to an illness or injury or even if you are made redundant.
Rather than a lump sum, this product provides a monthly payment to replace lost income so your bills, mortgage or rent can still be paid even if your salary stops.
There are two types of cover. You can get accident, sickness and unemployment cover, which is a short-term form of income protection lasting up to 12 months.
There is no medical underwriting needed.
A longer-term form of income protection pays a benefit potentially up to retirement, death or if you return to work.
It requires a full medical assessment though and can be hard to get, with 40% of applications failing in underwriting, according to insurance broker Assured Futures.
This type of cover can help people in most professions but can be beneficial for those in more active industries where there is a higher risk of injury such as construction and manufacturing.
You may not qualify for cover if you have certain pre-existing conditions or the premium could be higher so it is best to check the exclusions before taking a policy out.
Private medical insurance
It can take a while to recover from an illness or injury, especially if you have to rely on NHS appointments and long waiting lists.
An alternative is private medical insurance (PMI), also known as private healthcare insurance, which gives you faster access to a dedicated consultant or surgeon.
With average premiums of around £1,000 per year, PMI is seen as a luxury purchase and usually best for those with high incomes especially as the NHS is free to use.
PMI can cover everything from diagnosis such as scans and tests, to treatment such as surgery where you will even get your own private room in an NHS hospital.
You can usually cover yourself as well as your children and spouse.
Some policies also offer ways to reduce the cost of cover by demonstrating that you lead a healthy lifestyle, for example, by going to the gym regularly.
Policies do not cover pre-existing conditions, so won’t help if you have just recently been diagnosed or are currently suffering symptoms and looking for immediate treatment.
Policyholders have to pay a yearly renewable policy and the premium is based on your location, age and medical history.
It is possible to switch at the end of each year and you could even save £464 per year, according to Assured Futures, by shopping around for the best PMI deals.
Find the right policy for your needs at Assured Futures.