Not everyone needs life insurance (also known as life cover and death cover). But if your children, partner or other relatives depend on your income to cover the mortgage, any other unsecured finance or other living expenses, then the answer is yes – you probably do want life insurance, since it will help provide for your family in the event of your death.
Life insurance can pay your dependants money as a lump sum or as regular payments if you die. It’s designed to provide you with the reassurance that your dependants will be looked after if you’re no longer there to provide.
The amount of money paid out depends on the level of cover you buy. You decide how it is paid out and whether it will cover specific payments, such as a mortgage.
Term life insurance policies: run for a fixed period of time (known as the ‘term’ of your policy) – such as 5, 10 or 25 years.
These kinds of policies only pay out if you die during the policy. There’s no lump sum payable at the end of the policy term. Life insurance usually only covers death – if you can’t provide for your family because of illness or disability, you won’t be covered.
Some life insurance policies provide a terminal benefit, although these are not automatically granted. A terminal benefit will pay out on diagnosis of a terminal illness. Check the terms and conditions of your policy to see if you’re covered.
Most policies have some exclusions (things they don’t cover). For example, they might not pay out if you die due to drug or alcohol abuse, and you normally have to pay extra to be covered when you take part in risky sports. If you have a serious health problem when you take out the policy, your insurance might exclude any cause of death related to that illness. You can’t rely on the government to take care of your family – the money they would get from the state is much lower than you’d probably expect. If you want to provide for your family financially if you die, think about getting life insurance.
Did You Know?
More than 25% of men in the UK will die before their state retirement age and sadly, 34 in 1000 men will die by their 40th birthday. For women, the numbers are different - 16% of women in the UK will die before their state retirement age however, 19 in 1000 women will die by their 40th birthday.
Data taken from the ONS
What is critical illness insurance?
Critical illness cover is a type of insurance that pays out a tax-free lump sum if you’re diagnosed with a specific medical condition or illness listed in your policy. It's designed to help support you and your family financially while you deal with your diagnosis – so you can focus on your recovery without worrying how the bills will be paid.
How Does Critical Illness Cover Work?
You insure a fixed sum at the outset – usually the outstanding balance on your mortgage etc – this is paid out on the diagnosis of one of the number conditions listed on your policy. Your cover will be based on how long you want your policy to last (as most policies will end automatically once you make a claim) and how much you can pay each month. It's a good idea to make sure cover lasts while you still have significant demands on your income, eg paying off a mortgage or children's school fees.
Who Needs Critical Illness Cover?
In reality, everyone needs this cover as critical illness cover is designed to support extra costs if you fall ill. You should consider it if:
-You depend heavily on your salary to support yourself and/or your family
-You don’t have enough savings to live on if you were to become seriously ill or disabled
-Your job won’t cover you for a long period off work due to sickness (employee benefits package)
Remember too, that state benefits come in at around £70-£100 per week, depending on your circumstances. If you don't feel this is enough to cover your outgoings, you might want to consider critical illness cover.
How Much Cover Do You Need?
Again, think about the costs you'd need to cover if you were to fall ill and couldn't work. If you have children, you’ll want to ensure that your family is provided for in case you can’t work due to health problems. Increasing cover helps protect your cover against the effects of inflation, offering extra financial security for you and your loved ones. If you’re single, you’ll need a policy to make sure your mortgage can be paid off. Decreasing cover helps to pay off debt, like a mortgage, that's reducing over time. For extra protection, you can usually get critical illness cover and life insurance at the same time. This way, you'll be protected against different circumstances – with the flexibility to choose how much cover you need for each policy. And making a claim on one policy shouldn't affect the other. It’s important to understand that critical illness policies don’t cover all illnesses, however this will be disclosed to you when we select the best plan that meets your needs.
Thankfully all the above questions are what we are here to answer and we arrange cover from a selection of providers and tailor make the ideal protection plans designed around you and your individual circumstances.
Did You Know?
The estimated lifetime risk of being diagnosed with cancer is 1 in 2 (50%) for males, and 1 in 2 (45%) for females born after 1960 in the UK. This is in line with previous estimates.Cancer Research UK, Accessed January 2019
Income protection insurance (sometimes known as permanent health insurance) is a long-term insurance policy designed to help you if you can’t work because you’re ill or injured, but it shouldn't be confused with life insurance.
Income protection ensures you continue to receive a regular income until you retire or are able to return to work.
It replaces part of your income - If you can’t work because you become ill or disabled.
It pays out until you can start working again - Or until you retire, death or the end of the policy term - whichever is sooner.
There’s often a waiting period before the payments start -
You generally set payments to start after your sick pay ends, or after any other insurance stops covering you. The longer you wait, the lower the monthly premiums.
It covers most illnesses that leave you unable to work -
Either in the short or long term (depending on the type of policy and its definition of incapacity).
You can claim as many times as you need to -
While the policy lasts. It doesn’t matter whether or not you have children or other dependants – if illness would mean you couldn’t pay the bills, you should consider income protection insurance.
Did You Know?
Each year, one million people in the UK find themselves unable to work due to a serious illness or injury (ABI 2017).
Insurers pay out £13.9m per day in income protection, critical illness cover and life assurance which adds up to over £5 billion per year.
Overall, virtually all protection insurance claims (97.8%) were paid in 2017.
You’re most likely to need it if you’re self-employed or employed and you don’t have unlimited sick pay to fall back on.
YOUR HOME (OR PROPERTY) MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE
‘Think carefully before securing other debts against your home’
King Mortgages Ltd is authorised & regulated by the Financial Conduct Authority (FCA). King Mortgages Ltd is entered on the Financial Services Register https://register.fca.org.uk/ under reference number 803561.
Copyright © 2020 King Mortgages - All Rights Reserved.