- It pays your dependants a lump sum or regular payments if you die.
Yes, if your children or partner depend on your income to cover the mortgage or other living expenses.
- Check whether you have an employee package that includes ‘death in service’ benefits, if so, you may not need more life insurance or maybe just a top-up.
- If you’re young and healthy, life insurance is very good value for money – providing high cover at a relatively low cost.
- It only covers death – it won’t cover you if you can’t work due to illness or disability.
- Existing medical conditions may not be covered and – if you have a serious health problem – you may not be able to get cover or only at a high cost.
Critical illness insurance
- It pays a ‘lump sum’ (or some policies will pay an income) if you’re diagnosed with a specific serious illness, for example:
- heart attack
- certain types and stages of cancer
- conditions such as multiple sclerosis
- Most policies will also pay out if you are permanently and totally disabled after an injury or illness.
It’s not as important as life insurance but you may need it if you and your family depend on your income to cover the mortgage or other living expenses.
- Check whether you have an employee package that provides an income if you can’t work for a long period – you might not need critical illness cover.
- If you couldn’t support yourself and your dependants if you were too ill to work, then you should consider critical illness or income protection cover.
- If you can afford it – you can buy a combined life and critical illness policy.
- A payout can make a big difference when you need it most, for example you could use it to pay off your mortgage.
- Some cancers and ‘chronic’ conditions might not be covered, even if they mean you can’t work.
- Health problems you had before you took out the insurance are very unlikely to be covered.
Income protection insurance
- Pays a percentage of your take-home pay if you can’t work for a while because you’re ill or disabled.
- It covers most illnesses that leave you unable to work.
- It doesn’t cover you for unemployment.
You should consider it if you can’t rely on savings or employee benefits to see you through an illness.
- You’re most likely to need it if you’re self-employed, or you don’t have occupational sick pay or savings to fall back on.
- Your living expenses and bills should be covered until you can start working again or retire – depending on the term of the policy.
- You can claim as many times as you need to while the policy lasts.
- Beware different definitions of – ‘unable to work’ – this will mean different things in different policies – get advice before buying.
- You might not get cover if you have existing health problems or a dangerous job.
Payment protection insurance (PPI), and mortgage protection insurance (MPPI)
- Covers your monthly mortgage, loan, and credit card repayments in case you:
- have an accident
- become ill and can’t work, or
- become unemployed
- Usually, it won’t cover you:
- for pre-existing conditions
- if you are self-employed, a temp or contractor
- if you are retired or unemployed
- if you lose your job within 3–6 months of taking out the policy
You probably don’t need it if:
- you could get by on your sick pay or redundancy pay
- you have enough savings to cover your repayments
- your partner could cover the mortgage and other loan repayments
- you’re young, single, in good health, and only have spare cash for basic insurance
It can ease your money problems if:
- you’re made redundant and are likely to be out of work for a long time
- if you’ve little or no savings and quite a lot of debt
- you may have to wait up to 90 days before you can claim
- it will only pay out for a limited time (say 12 months) even if your illness or period of unemployment lasts longer