Insurance is a financial safety net that provides protection against various risks and uncertainties in day to day life. It allows you to manager the different risks and ensures that you are financially secure, should undesirable circumstances occur.
It is important to understand the various types of insure and their benefits when it comes to selecting a policy that suits your needs. After reading this you will understand the different types of insurance policies available and their advantages.
1. Life Insurance
Life Insurance is essentially a financial contract between an individual (the policy holder) and the insurance company. As part of the contract, the insurance company agrees to pay a specified sum of money to the policyholder’s beneficiaries upon the policyholder’s death.
The policyholder pays regular, agreed premiums to the insurance company in exchange for this coverage. The benefits of Life Insurance policies are that they provide financial protection for your beneficiaries by ensuring they receive a lump sum payout when you pass away which can help them to pay for funeral expenses, debts, or loss of income. If you would like to prevent the burden of your loved ones paying off the mortgage when you pass, Life Insurance may be the right protection for you.
One of the most important points to consider when looking into purchasing a life insurance policy is the cost. Premiums for life insurance policies can be expensive, especially for policies that offer substantial coverage. Some policies also have coverage limitations and exclusions. For example, suicide within the policy’s initial years may not be covered, and certain risky activities might lead to higher premiums or exclusions.
2. Critical Illness Insurance
Critical illness insurance provides you with a lump sum of money if you are diagnosed with certain illnesses or disabilities. The kinds of illnesses that are covered are usually long-term and very serious conditions such as a heart attack or stroke, loss of arms or legs, or diseases like cancer, multiple sclerosis or Parkinson’s disease. If being ill has left you out of pocket, it can be really handy to have a
large sum of money to spend on things like everyday expenses, paying off your mortgage or your medical expenses. You can use the money in any way you like, you don’t have to spend it on anything in particular. You may have other income coming in while you’re ill such as state benefits or sick pay from your employer. However, this may not cover all your needs. It’s a good idea to think about how much you would need to live on if you became seriously ill and whether you would need
some extra money to boost your income.
Before you take out critical illness insurance, make sure to check whether you already have some illness insurance combined with another insurance policy, such as a life insurance policy, or with your mortgage which covers you for serious illnesses. Also speak with your employer to see what benefits they pay out if you can’t work due to ill-health or disability.
3. Income protection Insurance
Income protection insurance pays you a regular income if you can’t work because of sickness or disability and continues until you return to paid work or you retire. Income protection insurance is also known as permanent health insurance. The amount of income you are allowed to claim will not replace the exact amount of money you were earning before you had to stop work. You can expect to receive about a half to two-thirds of your earnings before tax from your normal job. This is because some money will be taken off for the state benefits you can claim, and also the income you get from the policy is tax free. You can’t claim income protection payments straightaway if you fall ill or become disabled. You usually have to wait a minimum of four weeks but payments can start up to two years after you stop work. This is because you may not need the money straightaway as you may get sick pay from your employer or you may be able to claim statutory sick pay for up to 28 weeks after you stop work.
Before you take out an income protection insurance policy, check that you don’t already get income protection insurance through work. Some employers offer this as a benefit. You should also check to make sure you don’t have some other kind of illness insurance combined with another insurance policy or with your mortgage that covers you for serious illness. A lot of people prefer to rely on savings that they can use instead of insurance. However, you need to think very carefully about
whether you want to rely on savings. You may not be able to save enough to cover a long period of ill-health. And you may face another emergency, which would use up your savings and leave you with no cover for illness.
You should always check the terms and conditions of any insurance policy very carefully before you sign up to make sure it meets all your needs. You will need to be sure of exactly what you can claim for, when you can claim and how much you’re likely to get.
Written by: Jemma Long
Date: 14 November 2023