Everybody wants to do their best for their family and loved ones - but thousands of families have not purchased insurance to provide financial protection should the main breadwinner die or fall ill.
It's not as if there's a shortage of life insurance, critical illness or income protection policies.
So lack of family protection is clearly a problem. There are two main risks in life: either living too long and dying too soon. It's absolutely crucial to have some cover in place - especially if you have a young family.
Life Insurance - The purpose of life insurance is to provide a tax free lump sum if you were to die. This money is normally used to repay any outstanding mortgage, pay off debts and provide capital for dependents. If you have a mortgage but no dependents, then you don't have to insure for the mortgage as the property can be sold to repay the debt.
There are two main types of life cover - "level" and "decreasing". Level means that the insured sum remains constant - level - during the entire duration of the policy. Decreasing means that the sum insured steadily decreases from the initil sum insured down to nothing by the time the policy terminates. This latter type of policy is used almost exclusively in connection with the protection of repayment mortgages.
Critical Illness Insurance - Critical Illness insurance pays out a tax free lump sum on the diagnosis of a a critical illness, such as a stroke.
Income Protection Insurance - These policies are designed to replace earned income if the policyholder is unable to work due to illness or accident. Usually, there is a waiting period before the payments commence.
Accident, Sickness and Unemployment Insurance - These policies make monthly payments if the policyholder is unable to work because of an accident or sickness or becomes unemployed through no fault of their own. Payments can normally last for up to 2 years but this does vary between policies. There is also a waiting period before which a claim cannot be made, these waiting periods being 1, 3 or 6 months but often once payments start, they are back dated to the first date the policyholder was off work.
Before spending your money on any insurance, check what level of protection you already have and does your employer already provide similar cover as part of your employment package?
Monitoring your decision - Once you've bought a policy please don't forget it. Your personal circumstances will change as you life unfolds. Have you moved home or remortgaged?
So it's advisable to revisit your original decision at regular periods to ensure that the cover bought is sufficient for your needs.All this necessitates that you keep your protection policies under regular review. So it's advisable to revisit your original decision at regular periods to ensure that the cover bought is sufficient for your needs.
