How protection fits together

Existing Provision

The policies mentioned on this website are firstly, for financial security when you are alive, and second, to provide financial security for your dependants when you die.

Death is a rather tricky visitor because a calling card does not precede the event.  Poor health is the same.  In each circumstance, the larger employers offer benefits under the pension schemes and general provision such as death benefits and sick pay in addition to statutory sick pay.

The first step is to work out what is already in place. The second step is to supplement that provision with personal protection policies. 

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policies to fill the gap

The first objective is usually to keep your house if you suffer a serious illness or short term loss of income because you are ill. Serious illness is covered with Critical Illness Cover (CIC) and short term sickness to replace lost income is covered by Income Protection (IP). The CIC is calibrated to repay the mortgage and IP to pay the mortgage each month. 

You may be concerned that repaying the mortgage does not provide for living expenses. The answer is a second CIC or IP.

If you are not suffering from a critical illness or short term sickness, you might be dead. The insurance industry has an answer for that called Life Assurance (LA) which is a misnomer because it pays out on death. Life assurance pays a lump sum or a regular monthly payment called Family Income Benefit

affordability

Most people could not afford every category of cover in every situation: 100% cover is costly and those who could afford it are rich enough not to need it. 

This is where the mortgage broker steps in to ensure that a suitable level of cover is chosen which does not kill the clients finances stone dead. Cover at 60% is enough to see you through life’s mishaps; or 80%, whatever you feel is appropriate for your situation. Critical Illness Cover (CIC) is often an “add-on” to Life Assurance to repay the mortgage; then you may consider Income Protection (IP) or Family Income Benefit (FIB). But IP to retirement would be expensive so you may chose a shorter term with a longer deferred period.  That makes it affordable.

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think! It might come in handy

Think how a critical illness would affect you and your family. Inability to pay the mortgage, repossession, unpaid bills, lost income. Even a limited level of protection shows foresight; much better than repentance and regrets with hindsight. Contrast that to a lump sum which repays the mortgage (CIC) and income replaced until you recover (IP). Less stress, less worry and depression. Cancer cured, back to work and no mortgage! 

Statistics

The insurance industry isn’t reputed to be a happy payer of benefit under their policies. For example, business interruption clams due to covid was refused until the Supreme Court ruled on it.  

Protection policies, however, have a very clear path to payment in the hands of the medical profession. You are either diagnosed with a critical or terminal illness, signed off work as sick, or dead. Underwriters are keen to pay out on policies which have a genuine claim; and are not fraudulent. 

Most insurers would not deploy their expensive legal resources to argue that you are not dead or that the critical illness an NHS consultant says you suffer from is a fiction. 

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