Insuring for death, disease, and illness – the 3 clever ways to financial peace of mind

Over the last couple of years, Covid-19 has shown just how important it is to put the right financial protection in place. 

The pandemic has encouraged many people to consider how vulnerable they are to illness or death, and the problems this could cause to themselves and their loved ones. 

So, it’s perhaps no surprise that the Daily Express reports that one in four people are more likely to buy protection as a result of recent events.

Karen Brolly, head of product at the consultancy who commissioned the research, says: “The turbulence of the past 18 months has led people to re-evaluate their priorities.”

If you want to ensure peace of mind there are three types of protection you should consider. Read on to find out more about insuring for death, disease, and illness.

 

Death

Since the beginning of the pandemic, more than 140,000 people in the UK have died as a result of Covid-19. With tragic stories never far from the news, demand for life insurance has risen over the last 18 months.

Life insurance ensures that your loved ones receive financial support at a time they may really need it. They can use the payout to replace your income, pay off the mortgage, or to maintain their lifestyle if you’re no longer around.

Cover typically starts at around £6 a month, so it can be very cheap to secure the peace of mind you need.

Life insurance should be something you should consider if:

• You have children
• You have a mortgage or other debts
• You have a spouse or partner 
• Your loved ones would struggle to maintain their lifestyle without your income.

Importantly, life insurance will almost certainly pay out if you were to pass away as a result of coronavirus. Discover five frequently asked questions about life insurance and Covid and 10 ways you can cut the cost of your life insurance protection.

There are three main types of life insurance that you should consider.

Level term insurance

This simple cover pays a lump sum if you die within a defined term. For example, you might take £100,000 of cover over 20 years.

Decreasing term insurance

Under a decreasing term insurance policy, the amount of cover decreases over time. This type of policy is normally used in conjunction with a repayment mortgage, to ensure the payout is big enough to repay any outstanding mortgage.

Family income benefit

Instead of paying a lump sum, family income benefit pays life insurance in the form of a regular income. It can be a great way of ensuring your loved ones continue to receive an income if you pass away.

 

Disease

What would happen to your finances if you were diagnosed with a serious health condition, such as cancer or a stroke?

You may have to take an extended period off work on a reduced income. You may even have to give up work to focus on your recovery.

Ensuring you have the right protection in place can ensure you receive financial support at what is likely to be an emotional and stressful time. Critical Illness cover pays a tax-free lump sum if you contract one of a list of serious illnesses, such as cancer, multiple sclerosis, heart attack or stroke.

Read everything you need to know about multiple sclerosis and Critical Illness cover.

The Daily Express reports that cancer is the most common reason people claim on the policy, with insurer Zurich saying it accounts for more than four out of ten payouts. 

If you have Critical Illness cover in place and you’re diagnosed with a serious illness, you can use the payout to:

• Repay some or all of your mortgage
• Replace your income if you have to take time off work
• Adapt your home
• Pay for private care.

With research suggesting that you have a one in two chance of being diagnosed with cancer, and a strong possibility of contracting other serious medical problems, Critical Illness cover can provide real peace of mind.

It’s important to note that it’s unlikely a Critical Illness policy would pay out if you were diagnosed with Covid-19, even if the disease affected you seriously. Coronavirus is not normally covered under these policies, although if the illness leads to complications, then you may be able to claim.

For example, if you experience liver, respiratory, or heart failure as a consequence of Covid-19, or you spend a period in intensive care and require ventilation, then an insurer may consider a claim.

 

Illness

What would you do if you were unable to work because of illness, injury, or an accident?

While you may have a sick pay policy at work, this might not last beyond a few weeks. With Statutory Sick Pay in the UK in 2021/22 being just £96.35 a week – and only paid for 28 weeks – it’s unlikely that you will be able to maintain your lifestyle on this amount.

Furthermore, the situation could be even worse if you’re self-employed. If you’re responsible for generating all your income and you’re unable to work, you could struggle to maintain your mortgage, rent, bills and other commitments.

Discover five practical money steps you should take if you’re self-employed in our guide.

Income protection pays a monthly amount if you cannot work due to health problems, accident, or injury. This may include physical injuries, stress, back pain and long Covid. Read more about long Covid, managing your finances and protection.

Income protection typically lasts until you return to work, or you retire.

Most income protection policies have a “deferred” period. This is the amount of time you must wait before a claim starts to pay out. It is typically 4, 8, 13 or 26 weeks.

So, for example, if you receive full pay for 8 weeks from your employer if you are off sick, you might choose an 8-week deferred period, so your income protection kicks in when your sick pay ends.

Typically, the longer the deferred period, the lower your monthly premiums will be.

When considering income protection, it’s important not to confuse it with the controversial “payment protection insurance” or PPI. Income protection generally provides much more comprehensive cover with fewer exclusions than PPI.

 

How to find the right protection at the right price

Putting the right cover in place for death, disease, and illness ensures that you and your loved ones will be financially supported at a time it’s really needed.

So, how do you get the right cover at the right price?

Firstly, you should shop around. There are many types of policy on offer from dozens of insurers and so it’s important to do some homework to find the right cover for you.

Additionally, prices vary from insurer to insurer so it can pay to compare life insurance quotes online to ensure you don’t pay more than you need to for the cover you want.

It can also be beneficial to consult an expert. With wide experience of helping customers like you to find the right life insurance, Critical Illness cover, and income protection we work with many of the UK’s leading insurers to find you the right cover at the right price.

Contact us to speak to an expert, or find out more about life insurance, Critical Illness cover, and income protection.