There are 4 main types of Personal Protection available that would ensure that you and your family are financially stable in the event, god forbid, something was to happen to any of your family’s health.
Life Insurance:
Life Insurance is the most common one as people relate this to having a mortgage. This provides a lump sum in the event of your death. You can do a level term sum assured meaning the sum assured on day one will be the same on the last day of the term. A decreasing term sum assured meaning that the sum assured will decrease over the term of the policy. Or a whole of life policy that only expires, unfortunately when your life does, and provide a guaranteed sum assured. Even if you do not have a mortgage, there is still a potential financial risk that if you were to die, your family would struggle financially.
Critical Illness:
Critical Illness will provide a lump sum of money in the event of being diagnosed with a critical illness i.e. cancer, heart attack, stroke, paralysis, multiple sclerosis etc. This also include Total Permanent Disability TPD (check with insurer if this is included) meaning if involved in an accident and unable to fulfil daily activities, this would also provide a pay-out. Critical Illness is more of a family protection with children cover included (again, check with insurer if this is included) as some insurers have different tiers to their products. This is to cover any additional living costs that can occur when diagnosed with a critical illness, average living cost increase is £570 per month.
Income Protection:
Income Protection is a monthly income benefit to pay you in the event of being unable to work due to illness or injury. If you’re off work for a period of time, and your income is important to ensure all essential and living costs are met, an income benefit can kick in and provide you financially whilst you build yourself back to full health. This is different to critical illness and more comprehensive as with a critical illness pay-out it has to be diagnosed with a critical illness for the lump sum, whereas, with an income protection policy, all you need is a doctor’s note, and you will receive the monthly benefit (subject to underwriting).
Family Income Benefit:
Family Income Benefit is a hybrid of Life Cover and Income Protection. This is to provide a monthly benefit in the event of death. Even if you have a death benefit to clear the mortgage/debt, but you’re the main earner, your income has now stopped to provide for your family. A family income benefit will provide a monthly benefit to cover a sum assured agreed to cover essential and living costs. For example: Your monthly outgoings are £1,500pcm, you can put a policy in place to continue to pay the £1,500 a month, even if you’re no longer here.
Mark Baptist
Protection Specialist
