The coronavirus pandemic has given us all time to reflect on what matters most. That might mean thinking about what would happen to our loved ones if we became ill.
Financial protection products – in the form of life insurance, critical illness cover, or income protection – can be invaluable. But there are myths associated with them.
Here are three such myths, plus the reasons why they are wrong.
1. “Protection is too expensive”
There is no “average” cost of life insurance. The type of life insurance you need will depend on your individual circumstances and there are many different types available. Insurance doesn’t need to be prohibitively expensive though – L&G are currently advertising cover starting from £6 a month.
What is important is finding the right cover for you.
Term assurance pays out a specified lump sum if you die within a set policy term. If you have young children, you might cover yourself for long enough to see them through education.
Cover yourself for £200,000 for 18 years and the policy will pay out the full sum assured if you die within that 18-year term. Once the term ends though, you have no cover.
Decreasing term assurance is great for a debt that decreases over time, such as a mortgage. As with term assurance, you decide on an amount of cover and a set term, but as the term decreases and you pay off more of your debt, the sum assured decreases too.
This can make decreasing term assurance cheaper.
If you want a guaranteed payout on your death, you’ll need to consider whole-of-life cover. This guarantees to pay out on your death and can therefore be more expensive. The amount you pay per month can also increase over time and you could end up paying in more than is paid out.
Speak to us if you’d like to put life cover in place and we can help you find the best and most affordable deal for you, giving you peace of mind that your family will be looked after.
It could cost less than your monthly takeaway coffee bill.
2. “It won’t pay out”
Research conducted on behalf of Aviva in 2018 confirmed that over half (55%) of UK consumers believe that an insurer will try to avoid paying a protection claim. The number of successful claims was estimated to be 52%.
In fact, a 2020 ABI report confirmed that 98.3% of protection claims were paid out in 2019. That amounts to £5.7 billion, or £15.8 million paid out every day.
It is not easy to say why the myth persists, but it could be partly down to misunderstanding the type of cover taken out. That’s where we can help.
Critical illness cover, for example, pays a lump sum if you’re diagnosed with certain illnesses set out in your policy. You’ll likely find that heart attack, strokes, and certain cancers are covered, as well as conditions such as multiple sclerosis. You won’t receive a payout for an illness not listed on your policy.
Remember too that whole-of-life premiums can increase as you get older and term assurance will not pay out on death beyond the policy term. It is vital you understand what you are covered for, in what circumstances, and for how long.
We can help with that, so be sure to speak to us before you take out a new plan.
3. “I don’t need it”
No one likes to dwell on the possibility of becoming ill, but accidents and poor health can happen at any time.
If you don’t have anyone you specifically want to leave your money to, then life insurance might not be needed. If you have dependents, though, life insurance can give peace of mind that they will continue to be looked after when you die.
Whether you have dependents or not, if an accident prevents you from working, a loss of income could seriously impact your ability to pay your mortgage. Putting an income protection policy in place could help to cover your lost income.
The amount you receive won’t fully replace your lost earnings. You will likely receive between half and two thirds of your normal wage, and you will have to wait until an excess period expires before you can claim. This is usually between four and sixteen weeks.
Your payments will last for a set period too but should help to cover your outgoings until you can return to work, providing financial stability at a difficult time.
Get in touch
Whether you think protection is too expensive, unlikely to pay out, or simply not needed, accidents and ill health can affect us all.
Ensuring that you can still pay your bills if you are forced to stop work could make an enormous difference.
If you have dependents reliant on your income to pay a mortgage or school fees, putting protection in place can give you the peace of mind that your family will be looked after, no matter what the future brings.
We can help guide you through the protection you already have and identify potential gaps in your cover. If you’d like to discuss putting financial protection in place, please contact us today.
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