Taking out protection insurance gives you the peace of mind that you’ll benefit from financial support when the unexpected happens.
However, just as you might regularly review your savings, pension or mortgage, it’s important to revisit your protection from time to time. That’s because new research has revealed that almost 13 million people in the UK do not have the right personal protection insurance cover, leaving them vulnerable to unexpected bills in the case of injury, illness or death.
The study by leading insurer Legal & General, reported by This is Money, found that just 43% of adults had some form of personal protection, such as life insurance, Critical Illness cover or income protection.
However, of these 23 million people covered by such a policy, more than half have failed to change their insurance in line with life events such as getting married, buying a home, having children, or divorcing.
The report reveals that 2 out of 5 households would have to rely on their savings if their cover fell short – and many would be forced to use credit cards or take out loans to pay unexpected costs.
Legal & General is concerned that there is a lack of understanding about all the different types of protection insurance, and the amount of cover individuals should take out.
Paula Llewellyn at Legal & General says: “It is vital to have a safety net in place should the worst happen – but far too many people do not have the appropriate level of cover because of a change in circumstances. It costs nothing to have this reviewed.”
If it’s been a while since you reviewed your protection insurance, now’s the time to take a look. Here are five major life milestones at which you should revisit your protection to ensure you have enough cover for your needs.
1. When you get married
The Legal & General research found that fewer people made changes to their protection when they got married or entered into a civil partnership than at any other life milestone.
When you make your vows – “for richer, for poorer” – you commit to ensuring that you will look after your spouse or partner. That could include ensuring there is financial support in place to protect each of you should the unexpected happen.
For example, if you have joint accounts or joint financial commitments, you may want to ensure that these can be repaid if you die. Your loved one does not then have to worry about maintaining these bills on one income.
2. When you have children
You’ve previously read about how 1 in 3 UK parents don’t have any life insurance cover.
When you have a child, it’s important to review your protection arrangements. You need to ensure that your cover reflects the fact that you will likely have increased expenditure – indeed, the Child Poverty Action Group reports that the average cost of raising a child to age 18 in the UK is £69,621 for a couple family and £113,102 for a lone-parent family. If housing and childcare costs are added, these rise to £157,562 and £208,735 respectively.
If you were to pass away on the day your child was born, for example, you may need to provide a significant amount of additional protection to ensure that all the costs associated with raising a child can be met.
Even if you already have some protection in place, it’s important to ensure that it remains sufficient for your needs each time you welcome a new addition to your family.
Family income benefit is one cost-effective way to protect your family in case you pass away prematurely. This useful type of life insurance pays an income to your beneficiary from your death until the end of the term of the policy – perhaps when your children reach the age of 18 or 21. It ensures your loved ones receive financial support if you die, and cover starts from just a few pounds a month.
3. When you buy a home
When you buy a home, it’s likely that you will take out some sort of mortgage. This is likely to be the biggest financial commitment you ever make so you need to think carefully about what you would do if:
- You or your spouse died – could the remaining person afford the repayments?
- You or your spouse/partner were seriously ill – if you had to take an extended period off work, could you continue to pay your mortgage and other commitments?
- You were in an accident or you had an injury – could you pay your mortgage if you were unable to work for a period?
You recently read the worrying statistics that £400 billion of mortgages in the UK were unprotected, meaning many people would struggle to keep up with their repayments if the worst happened.
Remember also that, if you took out protection when you bought a previous property, it may not be sufficient or suitable if you move house.
For example, you may have borrowed more money and so your life insurance isn’t enough to repay the whole loan. Or, your income protection may not be sufficient to help you to pay increased mortgage payments.
So, ensuring that your mortgage is protected should anything happen to you or your partner is an important financial planning step.
4. When you separate or divorce
You read above that it’s important to review your protection when you get married or enter into a civil partnership – it’s also important to revisit your cover if you separate or divorce.
Firstly, if your cover is in joint names you may need to speak to your provider to remove one of the parties from the cover. You may also want to change the beneficiaries of the policy.
In addition, a separation or divorce may materially alter your cover needs. For example, if you have children and you are making a monthly maintenance payment, you may want to ensure this continues even if something happened to you. You may therefore need to find appropriate cover for your needs.
5. When you change jobs
As an employee, you may benefit from a range of perks provided by your employer. These may include:
- Death in service, where your beneficiaries will receive a lump sum (normally around two to four times your salary) if you die while you’re working for your employer
- Enhanced sick pay, where your employer will pay more than the statutory minimum for a period
- Critical Illness cover, where you’ll benefit from a lump sum if you are diagnosed with certain major illnesses or conditions.
If you move jobs, or decide to start your own business, you could lose some or all of these valuable benefits.
So, if you do decide on a career change, it’s important that you review the perks that your new employer provides to ensure it doesn’t leave you with any gaps in your cover.
Get in touch
If you’re one of the 12.9 million Brits who haven’t revisited your cover after major life events – or if you don’t have any cover at all – we can help you to find the right protection for your needs.
As life insurance, Critical Illness cover, and income protection experts, we’ll search the market for you to find the best price for the cover you need. Our customers have rated us “five-star” on Feefo, so you can be assured that you’ll benefit from first-class service.
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