Protection 

Protection for your mortgage/household income is important.  Sometimes life throws the unthinkable at us, and many of us will know someone who died young or has battled a serious illness.  The emotional and financial impact can be devastating. 

Between September and November 2019, over 2 million people of working age were unable to work due to long-term sickness.  Source; Office for National Statistics, Labour Market statistic summary tables published January 2020.

If you were off work due to long-term illness, how long could your finances cover your household’s monthly outgoings?   

There are different types of protection, which we have detailed below: 

Life Cover 

This gives your family protection if you die.   

You can buy life cover that pays out a determined lump sum amount if you die, (level term assurance), or cover where the amount that is paid out decreases in line with your mortgage balance, also known as mortgage protection/decreasing term assurance.  

Most people who buy life cover buy just enough to pay off their mortgage, but do you need more?  For many of us, our mortgage is one of many financial commitments we have.   

Credit cards, personal loans, council tax, childcare costs, food and utility bills are just some of the regular payments we have to make.  And most of these won’t go away if you died prematurely.  

£14,540 was the average household unsecured consumer debt in the UK excluding mortgages in the third quarter of 2019 Source- TUC.org.uk, Unsecured debt hits a new peak of £14.540 per household, 10 January 2020.

This is where other forms of protection can help you.   

Critical Illness Cover (CIC) 

This provides financial protection of a lump sum payment for you and your family if you become ill with one of a defined list of critical illnesses.   

The good news is that more and more people are surviving critical illnesses.   

According to Cancer Research UK, survival rates for cancer are increasing- and cancer survival has doubled in the last 40 years.  Source- Cancer survival statistics for all cancers combined, cancerresearchuk.org, June 2020 

The bad news is the effect of dealing with a long-term illness, such as cancer, can be financially devastating.  Critical Illness Cover can take the financial pressure off, by providing a lump sum payment for you and your family.   

 Income Protection 

This can provide a monthly income if you’re unable to work due to illness or injury.  In most cases you can cover up to 60% of your monthly income, to be paid out, should you need to claim due to illness or injury.  You can choose a policy that will pay out for a year, 2 years, or even cover you right up to retirement age; if you had a serious accident or illness which meant you could never return to work, you would receive a monthly payment up until you would have retired.  

If you fall ill or have an accident at work, how long would your employer continue to pay you if you couldn’t work?  How long would your savings last if you had to use them for your monthly household bills?   

Who Else Would You Rely on? 

Many people think they could rely on money from their employer, their savings, their family or the state.  But recovering from a serious illness can take a long time.  How long would the money last?  

Sick pay from your employer would help but might only last a few weeks. The state provides Statutory Sick Pay and Employment and Support Allowance, but is this enough?  Statutory Sick Pay is currently £95.85 a week; could you survive on that? 

Surprisingly few of us think about taking out protection. According to research, only 19% of UK adults aged 18-34 are planning to take out income protection and just 21% are considering critical illness cover. 

Why Use a Financial Adviser 

Your jem adviser can make sure you get the plan that’s right for you today, tomorrow, and in the years to come. Making sure you have enough of the right protection can sometimes be a little complicated.  

Not all protection plans are the same, and some offer more choices than others. The type of plan you buy, how much cover you have, for how long and from which insurer, are just some of the decisions your adviser can help you with.  

Applying for a protection plan can be more complex than applying for other insurances. This is because protection insurers have to make an assessment of your health now and in the future, taking account of the risks your lifestyle and family history can add.  

Your adviser can guide you through the whole application process. By helping you to make sense of the choices available to you, your adviser can make sure you get the protection plan that suits you today and also changes with you as your life changes.