Category: Life Insurance

No-one could have predicted the first half of 2020 and what it would bring, so the notion that you could have been completely prepared for what was to come is difficult to comprehend. I’m guessing that if you could travel back in time and put more insurance policies in place you more than likely would have.

One of the most overlooked types of insurance has typically been income protection. Research conducted by the Financial Conduct Authority shows that only 35% of people have any form of protection insurance in place, and of that 35%, only 4% have any form of income protection.

Two of the most common reasons for this is the lack of understanding around what income protection is, and also the belief that you’ll never need it! However, a good way to understand what income protection is and what it does is to look at the furlough scheme used by the government in recent months.

Since March, nearly ten million UK workers were placed on furlough, so it’s likely that if not directly impacted yourself, you know someone who has been. The basic premise of furlough is to support workers financially while they’re unable to work. Albeit that the mechanics, criteria and funding are different, this is basically what income protection does! What would have happened to all those workers if the furlough scheme hadn’t been introduced? This is the question you need to ask if yourself and assess your own circumstances if don’t have any income protection in place.

A common response to income protection is ‘it’ll never happen to me!’, but what 2020 has shown us so far is that nothing can be predicted and it is better to be prepared and protected should the unexpected happen.

What if you’re self-employed?

If you’re self-employed you can still get income protection, and in fact it may be even more relevant for you. However, according to research from The Exeter, less than one in 10 self-employed workers protect their income, and nearly a fifth of self-employed workers have no personal savings to rely on in times of financial uncertainty.

According to the Office for National Statistics, the UK self-employed workforce grew to 5 million by the end of 2019, representing 15.3% of employment, up from 3.2 million in 2000.

With more UK workers embracing self-employment, options within the marketplace have adapted to better serve this growing sector of the workforce, with bespoke policies tailored for the differing requirements of the self-employed.

Protection insurance is severely undervalued by thousands of people across the UK. Often seen as an unnecessary expense – there are a vast number of people living in this country who are yet to take out a protection plan and therefore remain unprepared should they lose their income or worse – their life. With a cost-of-living crisis currently causing panic for many, it’s so important to stay covered even when you’re looking to cut costs elsewhere. Despite common misconceptions surrounding how often providers pay out, tougher times make protecting your family should anything happen to you even more vital.

The necessity of protecting your income in particular has never been more apparent. The pandemic offered millions of people a scary insight into just how quickly circumstances can change for anyone by forcing a huge proportion of the population out of work. Now, imagine how dire that would have been without the safety net that the furlough scheme provided for so many households nationwide. Illness can stop you working at any time and without warning and being in the midst of a cost-of-living crisis, protecting yourself against such an outcome has never been more valuable. Well, that is the harsh reality that faces those who are yet to take out a protection policy. Despite the evidence, there are still some common myths that dissuade people from turning to protection.

Do providers actually pay out?

So, do providers actually pay out – or is it all too good to be true? Well, contrary to what some sceptics might say, 98.3% of all claims made in 2019 on protection policies were accepted. This figure is enough on its own to display just how common a successful claim is – and how unlikely it is that a claim is rejected. There are of course a few occasions when providers don’t pay out – most commonly due to underlying issues not being disclosed when the policy is initially taken out.

Can everyone get cover?

Another common misconception surrounding the protection industry is that more complicated cases get turned down. There are plenty of insurance providers that specialise in the more complex of cases – and the figures suggest that the vast majority of those cases pay out too. The Exeter reported that 93% of claims were paid in 2021 with a total pay-out of over £10 million. Out of the 1,318 claims made throughout 2021, only 92 were turned down.

It’s so important for everyone to protect their income, and if the past couple of years have taught us anything, it is that no one can predict what the future holds. Being protected against any eventuality is a safety net that could prove to be invaluable to any of us.

When it comes to our children, there’s nothing we wouldn’t do to protect them – right? Well, there are some things that so many parents fail to consider. No one wants to imagine their child falling ill – but it does happen to some and is a situation that is important to be prepared for. Critical Illness Cover is an integral part of any protection policy if you have children – and it will help with some of the impacts you may not have even considered.

Children’s critical illness cover plays an important role in the protection space. Of course, you’d do anything to protect your children from harm – but what happens if they do fall critically ill? Aside from the obvious emotional distress such an ordeal can cause – a child falling ill can have a huge impact on your finances, especially if you’re forced to take time away from work to look after them. In the past, children’s cover was typically included automatically on critical illness plans regardless of whether or not you had children, it is now much more common for insurers to offer a more flexible range of options tailored to your needs – so it’s important to ask about it when getting covered.

The benefits of children’s cover can often be overlooked as it isn’t an income earner within the household falling ill, but the financial benefits from the cover offer a peace of mind and financial stability that is hugely valuable in the case of something as difficult as your child becoming critically ill does occur. Pay outs can be used to cover losses of income if you had to take time away from work to care for your child, as well as paying for expensive treatments or essential modifications to your home where necessary. Children’s CIC will protect your child whether they are naturally born to you, a stepchild or adopted.
What age does CIC cover children for?

The oldest age you can hope for your child to be covered for under a child’s critical illness policy ranges from 18 to 23 depending on the provider, although the majority will at least cover until 21. Most providers offer cover that start from birth, although some won’t offer a policy until your child is 30 days old.

Of course, even just imagining your child falling critically ill is an incredibly difficult thing to do – which only highlights just how important it is to get them covered. The emotional stress of dealing with a critically ill child is more than enough for anyone to deal with – and CIC offers peace of mind that your financial situation will be secure if such a tragedy were to happen to you.

If you already have cover in place but it doesn’t cover your children, get in touch with your adviser to talk through your options. You can add your children to your policy at any time, so make sure to speak with your adviser and ensure your whole family is protected