What would you do if you were diagnosed with a life threatening illness and were unable to support your family?
It’s not something many people like to think about, let alone plan for, however life insurance is something everyone needs to consider.
It can be confusing for many British families who depend on a single person’s income to stay afloat to find a suitable insurance to cover them, should this bread winner be diagnosed with a critical illness, or even die unexpectedly.
The current economic climate has affected the whole of the nation’s ability to save as the cost of living adds pressure to our budgets.
So for those who are not lucky enough to have a good savings stock aside for times of crisis, it is important Brits consider taking out some kind of insurance to support them should their savings be inadequate to do so.
Which one should I choose?
With medical advancements, it is now a common occurrence that Brits are diagnosed with a critical illness and survive after receiving treatment. So, critical illness and income protection are just as important as life insurance.
According to the Telegraph, a 30-year-old male has a one in 10 chance of dying before reaching retirement age, and a one in four chance of suffering a critical illness.
Income Protection vs Critical Illness
• Income protection is a recommended insurance which covers a person’s salary in the event they are unable to work. This is often thought of as better than critical illness as it pays out in a wider set of circumstances and pays a set amount to cover what your income would have paid for, for a set period specified in your policy.
• Critical illness cover pays out a lump sum should you come down with a critical illness that is included on the policy list. If your illness is not on the policy then you will not receive a payout.
• The insurance covers medical bills and living costs for a certain period defined by your policy, but as explained, it comes in a lump sum. Your premiums will depend on your health at time of taking out the insurance, and if you have a family history of one of the critical illness on the list, your premiums are likely to be higher.
• Income protection can be quite costly however as it usually pays out when you are unable to carry out your job under most circumstances. If you want to reduce the amount you pay a good way to do this is to extend the period where you are eligible to seek a payout when claiming, if you can afford to sit on your current savings for more than two months after being unable to work then you could reduce your premiums.
Why Life Insurance?
• Life insurance on the other hand is also useful for long term cover, so your family can continue to carry on with their life after you are gone.
• Things like mortgage repayments, university fees and monthly income can all be covered with life insurance, which is invaluable should you not be there to provide it.