Do you know how life insurance, income protection, or Critical Illness cover works? If you don’t, you’re not alone.
New research from a leading insurer has found that many UK adults do not fully understand financial protection products, with many confessing they have never even heard of certain types of cover.
Understanding how insurance works can give you the peace of mind that you have the right protection in place for you and your family. Read on to find out more about this research, and for everything you need to know about income protection, Critical Illness cover and life insurance.
Millions of people haven’t heard of important protection products
A recent study by MetLife UK aimed to explore consumer views of financial protection in a Covid-19 world. The research revealed that many people simply weren’t aware of some of the most important protection products:
- Almost one in five had never heard of income protection
- 20% said they had heard of income protection but didn’t know what it covers
- One in six (17%) had never heard of mortgage payment cover protection
- One in five (18%) said they’d heard of Critical Illness cover, but they did not understand what it covers.
Perhaps worryingly, the research also showed a quarter of consumers said their job comes with an associated risk of injury. This means that there are millions of people who could potentially benefit from this cover.
Separate research from MetLife UK found more than a third (34%) of people have had to take four weeks or more off work due to an accident or illness. Of these, nearly half (47%) admitted they needed financial support to help them with their mortgage repayments.
Rich Horner, head of individual protection at MetLife, said: “The issue for consumers is two-fold. Not understanding what is available and what it covers, and associated costs.
“By having the right financial protection in place, it can help alleviate some of the stress and worry that not having anything in place often brings.”
Income, health, and life protection can provide a valuable financial safety net for you and your loved ones. So, if you’re unsure of the benefits of each type of cover, here’s what you need to know.
Income protection helps you continue to pay your bills if you’re off work
Income protection can ensure you still get money if something happens that means you can’t work. If you’re off for an extended period due to illness, injury, or an accident, income protection can pay a steady income to help you meet your regular commitments such as your mortgage, rent, or bills.
The amount you receive will typically be round 60% of your normal income. Income protection will kick in after a “deferred period” – this is typically 4, 8, 13, or 26 weeks.
For example, if you receive 8 weeks full sick pay from your employer, you might choose a “deferred period” of 8 weeks for your cover. Your income protection would then begin to pay out once your sick pay ended.
Income protection is vital if you:
- Have little or no sick pay through your employer
- Are self-employed and your income would fall if you had to take time off due to illness or injury
- You want to ensure you can continue to meet your monthly commitments if you have to take an extended period off work.
Remember that, in 2021/22, Statutory Sick Pay in the UK is just £96.35 a week, and you only receive it for up to 28 weeks. So, if you don’t think you’d be able to maintain your lifestyle on this amount, it might be worth putting the right protection in place.
Generally, income protection policies will pay out until you return to work, retire, or pass away.
Critical Illness cover pays a tax-free lump sum if you’re diagnosed with a serious condition
The MetLife UK research found that around one in six people (16%) did not know what Critical Illness cover was. One in five (18%) said they’d heard of Critical Illness cover, but they did not understand what it covers.
Critical Illness will pay a tax-free lump sum if you’re diagnosed with a condition covered under your policy. This might be a serious heart attack or cancer, multiple sclerosis, or a stroke.
It provides you with much-needed financial support and what is likely to be an emotional time. It can replace income if you must take an extended period off work. It could also support you if you have to adapt your lifestyle after your diagnosis.
This type of protection ensures you don’t have to be concerned about money when you should be focusing on making a full recovery from your illness.
Life insurance provides financial support to your loved ones when you’re no longer around
Life insurance ensures your loved ones receive financial support when you pass away. Your family will receive a payment which they can use to repay the mortgage, pay off debts, pay for funeral costs and meet other essential expenses such as household bills.
There are many UK life insurance providers that offer different types of life insurance. The three main types of life insurance are:
- Level term insurance – pays a fixed amount if you die within a specific term. For example, it might pay £100,000 if you die within 25 years
- Decreasing term assurance – pays a reducing amount if you die within a specific term. It is typically used to cover a repayment mortgage
- Whole of life insurance – pays a specified amount on your death, whenever that occurs.
Life insurance is a cheap and effective way of making sure your loved ones receive financial support when you’re no longer around.
The right protection can give you peace of mind
Putting the right protection in place can give you the peace of mind that you and those closest to you will be able to maintain your lifestyle if the worst were to happen.
Despite this, many people don’t understand the cover or haven’t put the right protection in place. Indeed, the MetLife UK study found that one in six (16%) of those questioned had previously needed a protection policy but did not have one.
There are a wide range of protection products available on the market with dozens of companies providing insurance. It can feel like a difficult task trying to navigate these products and providers.
We are a trusted independent broker which means we specialise in helping can you to compare income protection, Critical Illness, and life insurance quotes to find the policy that best meets your needs.
We work with dozens of the UK’s top insurers, and we’ll search the market on your behalf to find the best price for the cover you need.
- Compare a wide range of protection products from the UK's most reputable providers
- Our service is fast, free, and secure
- We can help you if you have a pre-existing medical condition.
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