A Life insurance policy will pay your dependents a lump sum or regular payments if you die unexpectedly. If you have a partner or children, life insurance can provide you with the reassurance that they will be able to cope financially without you.

You might consider Critical illness cover, which will cover you in case you get a specific type of life changing condition. Payment protection insurance will support you if illness or redundancy means you can’t meet regular payments of your debts.

Income protection insurance is designed to support you financially if you can’t work due to illness or injury and your income drops. This type of policy is particularly relevant for anyone who is self-employed and wouldn’t get sick pay. You might consider getting short-term Income protection insurance. This type of policy will pay out a monthly sum, for a set period of time, if you lose your source of income due to illness, accident, injury or redundancy.

Life Insurance Cover:

Life Insurance is a protection product which helps to provide financial security and cover to your dependents, family and loved one’s in the unfortunate event of death. The said money that is paid out as a claim from the policy, can be very useful to the dependents to continue the lifestyle they are used to. The funds received can replace a loss of income and could be used to pay off debts like Mortgages, which can reduce a huge financial burden.

The policy holder will have to pay a monthly premium for the duration of the policy term, the amount of premium to be paid is dependent on several factors like age, health and lifestyle.

Term assurance is a cover where there is a fixed term to the policy and if the policy holder were to die within the term of the policy, then the claim would pay out to the beneficiaries. However, if the policy holder survives beyond the set fixed term, the policy would lapse at the end of the term and there wouldn’t be any pay out.

There are predominantly three types of Term Assurance options:

1. Level Term: In this scenario the amount paid would be fixed or level throughout the term of the policy.
2. Decreasing Term: Under this option, the amount of cover decreases as the term of the policy reduces, this option is generally used to cover debts like Mortgages especially Residential Mortgages where with each repayment there is a reduction in capital owed to the lender.
3. Increasing Term: Conversely to the Decreasing term option, under this scenario the cover amount increases over the duration of the policy. This is opted by individual who factor the potential increase in inflation rates in future, which would ensure their dependents would always remain well covered in times of increased costs.

Critical Illness Insurance:

Critical Illness insurance pays out a lump sum when the policy holder is diagnosed with a particular critical illness, which is covered under the conditions of the policy. While Critical Illness Insurance is a standalone product, is it more often than not taken alongside a Life Insurance policy.

The types of conditions covered under Critical Illness cover vary, as per the product offered by the provider but will usually include conditions like Cancer, Heart attack and Stroke. 

The availability of Critical Illness cover is largely dependent on whether you have pre-existing medical conditions. If you do have any pre-existing conditions, you can still be eligible for cover, but this may affect the selection being limited to specific providers, rather than a range.

The benefits of a Critical Illness cover are that the lump sum pay out can be used to compensate a temporary loss of income due to the specified illness.

Income Protection Insurance:

Income Protection cover pays out if you are unable to work due to illness or injury, however it will not pay out in the case of redundancy. The primary difference between an Income protection insurance policy and Critical Illness Insurance policy is the amount and frequency of pay out.

In an Income protection claim the pay out is periodic and generally a percentage of earnings usually 60% to 70% paid out on monthly basis and the said payment are exempt from tax, as compared to Critical Illness claim which makes a one-time lump sum pay out.

The pay out under Income Protection policy begins after the end of a pre agreed period know as a deferral period, the shorter the deferral period the higher the premiums, the usual deferral period is between 13 to 26 weeks. While seeking Income protection cover, it is essential to check with your employer the cover they have in place to support you as an employee for the time off work.

Tax advice is not regulated by the FCA.

Our experienced Protection advisers are on hand to discuss your specific requirements and work with you through the process.

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