If you have people who depend on you, you need to consider insurance.
Life insurance is the obvious choice. It could deal with your debts and provide an income for those you leave behind if you were to die.
But it could not help if you became too ill to work or were made redundant. Fortunately, there are other types of cover designed to help in those scenarios and give you peace of mind in a less than peaceful world.
But how much cover do you need? Too much, and you are committed to monthly payments that leave you short of cash. Too little, and you leave those you care about without enough to cover debts and replace your salary.
At Continuum we are looking at ways to calculate the cover that is appropriate for you.
The level of cover you should have
Everyone, and every family is different, and has different needs from their insurance protection. Adequate cover for a couple might be far from enough for a family with several children and a large mortgage. So, what do you need to cover?
- Your income: if you are looking at a lump sum payout, multiply your income by several years—ten is often suggested. Other policies pay out annually and can exactly match your salary.
- Your mortgage: Mortgage payments are usually a household’s largest monthly expense. You need to ensure your family can keep their home.
- Debts: You don’t want to leave your loved ones paying off your credit card or loan debt.
- Childcare: It’s not just a main breadwinner that needs cover. Death or incapacity of a partner could increase expenses for the family, particularly if they need to arrange outside childcare. Will you need to cover school fees and university tuition for your children?
It’s a simple calculation. Add up all these figures and you should be able to see the kind of insurance cover your family needs.
The type of cover you need
So, what types of policies do you need to provide this cover?
Life cover is essential. If you were to die, it would provide a cash lump sum for those you leave behind. But life cover alone is not enough. Dying prematurely is a risk, but so is illness and accident that are debilitating rather than fatal. There are several types of policy to help.
Critical Illness Cover (CIC) pays a tax-free lump sum if you are diagnosed with an illness listed in the policy, which usually include most cancers, heart attack and stroke.
Permanent Health Insurance or PHI pays a proportion of your salary if illness or accident stop you working and can continue until your normal retirement age.
Accident, Sickness and Unemployment (ASU) cover can provide a replacement income in case of illness, accident or redundancy for a maximum of 12 or 24 months (an ASU policy covers a proportion of your monthly income).
These types of cover can be offered as standalone policies, but it might be easier and more cost effective to integrate them with your life cover. It means a single (lower) premium each month, and complete peace of mind.
What will your cover cost?
The monthly cost of your cover will depend on the size of the potential payout (higher monthly premiums mean larger payouts) and the risk of your insurer having to pay out. This is based on two key factors:
- Your age: Premiums for life insurance are lowest for those in their 20s and rise drastically after 40.
- Your health history and lifestyle. Conditions such as diabetes or heart disease can increase your life insurance costs. Smoking, drinking and obesity will mean paying more – as will a dangerous job and a liking for adrenaline sports.
Getting the cover, you need
Insurance is very competitive, and you need to shop around, but beware. Comparison sites may appear to find you the cheapest policy, but they usually also take a large commission from the insurer.
A call to us at Continuum really could help you secure the type and levels of cover you need and pay less for it all. We can help you decide exactly the cover you and your family must have and then can search the entire market for the very best price.
None of us know what is around the corner, so why not call us today?
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable Protection products, you should seek independent financial advice before embarking on any course of action.
Your home may be repossessed if you do not keep up repayments on your mortgage.