In 2019 the UK insurance industry paid out more than £5.7 billion in protection claims. This is the highest claims paid on record and should give people the confidence that providers do payout should the worst happen. But what do different insurances cover and how can you tell which one is right for you? Here's everything you need to know.
LIFE INSURANCE
What is it?
Life Insurance, also known as 'death cover' will pay your dependents a lump sum of cash if you die unexpectedly or are diagnosed with a terminal illness and not expected to live longer than 12 months.
Who needs it?
This depends on your personal situation. Are there any people that depend on you financially, like a partner or kids? One way to determine whether or not you need life insurance is to consider what your financial obligations and contributions are and what impact any shortfall would be on your loved ones if you were no longer around.
Why is it important?
It’s there to provide financial support for your loved ones after you’re gone, whether that means helping to pay off the mortgage, the costs of raising children or to simply pay the monthly bills.
CRITICAL ILLNESS
What is it?
Critical Illness cover is a type of insurance that pays out a tax-free lump sum if you're diagnosed with, or undergo surgery for, a critical illness that's listed within a policy.
Cancer is the biggest single reason for an individual critical illness claim in the UK (ABI/GRiD). But it also covers long-term and very serious conditions such as a heart attack, stroke, or diseases like multiple sclerosis and Parkinsons.
Who needs it?
It's worth considering putting Critical Illness in place if:
You do not have enough savings to cover your outgoings if you become seriously ill or disabled and cannot work.
If your employer does not offer any benefits packages that cover long term sickness.
You are a single person with no dependants — the policy would pay out a lump sum if you become ill, rather than paying out to those who rely on your income to survive.
Why is it important?
It's designed to help support you and your family financially while you deal with your diagnosis — so you can focus on your recovery without worrying about how the bills will be paid.
INCOME PROTECTION
What is it?
Income protection is a policy designed to help you if you can’t work because you’re ill or injured. It ensures you continue to receive a regular income until you retire or are able to return to work.
Who needs it?
You're most likely to need it if you're self-employed or employed and you don't have sick pay to fall back on. It doesn't matter whether or not you have children or other dependents – if illness would mean you couldn't pay the bills, you should consider income protection insurance.
Musculoskeletal is the biggest reason for individual income protection claim in the UK, followed by mental health and then cancer (ABI/GRiD).
Why is it important?
Our income is our most important asset as it allows us to maintain our current lifestyles. If you really think about it, the money we earn pays for almost everything we own. In short, this is a smart way to provide financial security should you become ill.
PRIVATE MEDICAL
What is it?
Also known as PMI or Health Insurance it's a policy that covers the cost of private healthcare from diagnosis to treatment including all or some of the cost of treatment for acute conditions (i.e. conditions that come on suddenly and have a limited term of treatment), but not chronic conditions (i.e. conditions like diabetes that you may live with all or much of your life).
Who needs it?
Having PMI is considered a luxury by many, particularly because our NHS offers fantastic levels of free care and treatment. However, with the added NHS pressures and extremely long wait times, private healthcare is worth considering.
Why is it important?
It gives you a choice in the level of care you get and how and when it is provided.
I hope this delivered as a starting point for the types of protection out there. But please remember to ALWAYS do your research, or talk to a financial adviser before making any big financial decisions.
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