Life Insurance

Life Insurance

Do I need Life Insurance?

The answer to this depends on your individual circumstances. But if there are people that depend on you financially, such as children or a partner who relies on you financially then life insurance could be a way of helping to protect them.

You should consider whether your family could manage if you were no longer around. How much money would they need to cover childcare costs, household bills and day-to-day living expenses? 

For new couples, homeowners, young families and those with older children, you should consider getting life insurance.

What does life insurance cover?

Life Insurance is usually chosen to help financially protect loved ones. The cash sum could be used by your family to help cover everyday living expenses such as household bills, rent or childcare or it could be used to help pay off a mortgage.

Raising a child is one of the obvious reasons people start to think about life insurance. After all, what is life insurance for if not to protect families? But it’s not the only reason you should think about getting cover. If you live with your partner and they would struggle to pay the mortgage if you were to die, then you should consider life insurance.

Decreasing Life Insurance is designed to help protect a repayment mortgage so the amount of cover reduces roughly in line with the way a repayment mortgage decreases.  

Every individual can choose the amount of cover they want and how long you need it for. Life insurance can be taken under joint or single names.

What is critical illness insurance?

Critical illness cover pays out a tax-free lump sum if you’re diagnosed with an insured medical condition during the term of your policy. It’s not the same as life insurance, which pays money to a person or people you name if you pass away.

Critical illness

Do I need critical illness insurance?
Critical illness cover can offer valuable financial support if you fall ill and are forced to stop working. For example, a critical illness insurance policy pay out can be helpful for:

- Mortgage payments
- Lost earnings
- Household bills
- Private medical treatment

You should also consider whether you’ll be buying the policy just for yourself or for your partner too – you’ll be able to take out joint life insurance with critical illness cover. However, you should keep in mind that these policies will usually still only pay out once – for whoever on the policy is the first to be diagnosed with a critical illness.

What does a critical illness policy cover?

The specific conditions covered by a critical illness policy will depend on your insurer and the type of cover you take out, but you can generally expect the same core conditions to be included – such as:

Heart attacks
Strokes
Some types of cancer
Some critical illness policies might cover certain types of conditions, or conditions at a certain level of seriousness – for example, different types or stages of cancer. You should check for sure if other conditions are covered, some critical illness policies do not cover the following:

Organ failures
Organ transplants
Permanent disabilities resulting from an illness or injury
Traumatic head injuries
Parkinson’s

The information on what conditions are available are on the insurers policy documents – it’s always important to read these before taking cover out.


Do you need income protection insurance?

Each year one million people in the UK find themselves unable to work due to a serious illness or injury (ABI 2017). Income protection insurance is designed to give you some cover if you can’t earn an income for those reasons. If something happened to you would you be able to survive on savings, or on sick pay from work? If not, you’ll need some other way to keep paying the bills and you might want to consider income protection insurance.

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.

It 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, die 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 

You can claim as many times as you need to - while the policy lasts.

With income protection insurance, everything depends on getting the right policy – so it’s best to get advice from an independent financial adviser or broker.

Do you need it?

According to the ABI, one million workers a year find themselves unable to work due to a serious illness or injury.

It doesn’t matter whether or not you have children or other dependents – if illness would mean you couldn’t pay the bills, you should consider income protection insurance.

You’re most likely to need it if you’re self-employed or employed and you don’t have sick pay to fall back on.

Check what your employer will provide for you if you’re off sick.


Family income benefit

Family income benefit is a type of life insurance that provides a regular income for your loved ones if you die during the term of the plan. There is no cash in value, so if you stop making payments your cover will end.

Most families rely on at least one regular monthly salary to cover their household spending. How would your household cope financially if you lost a source of income?

For peace of mind, many people choose a type of life insurance called family income benefit.

What is family income benefit?

Family income benefit is a type of life insurance, which lasts for a set time known as the term. A family income benefit policy will pay out a monthly tax-free income if you die during the term, until the policy ends.  

How does family income benefit work?

The monthly payout from a family income benefit policy is paid from when you die until the end of the term. Once the term ends, cover and any payments stop. So if you take out a 20-year policy and die five years into it, your family will receive a regular monthly income for the remaining 15 years. If you were to die 16 years into the policy, it will pay out for the remaining four years.

Why you might want it

Household bills and other financial commitments need to be met and a loss of income could mean financial hardship - this is where family income benefit life insurance can help in terms of providing financial support.

How much cover should I get and for how long?

This will depend on your own circumstances. For example, if you have a young family, you might want cover to run until your children are grown up, using the income for everyday expenses or specific items such as school or university fees.

To decide how much cover you want, work out how much your family is likely to need every month. It’s a good idea to factor in inflation (the rise in the cost of living) when doing your calculations as this can impact the amount you’ll need in the future.

Family income benefit is a type of life insurance that provides a regular income for your loved ones if you die during the term of the plan. There is no cash in value, so if you stop making payments your cover will end.

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