Steve Royle Protection Adviser

Elaine Bell Protection Adviser

Lorraine MacDonald Protection Adviser

 

Need Protection Advice? Call us on 01522 540555 or fill in the enquiry form.

 

The truth is... when it comes to protection insurance, millions of UK citizens are dangerously underinsured and the unfortunate ones usually only find out when it's too late (i.e. after the event!). Its easy to feel infallible when your health is good and life is treating you well and think "it will never happen to me!"

Let's face it, nobody actually wants insurance cover itself, what we really want is the peace of mind knowing that if anything untoward should happen to us, we (and our loved ones) are financially protected.

Protection insurance can be a morbid subject to discuss but nevertheless a very important one, the best way to put your needs into perspective is to think of the effect if the worst was to happen, like this ~

If anything were to happen to you what would you prefer your partner to hear?

a) "Here's a cheque which should solve your financial concerns" or
b) "Unfortunately the amount the state will provide will not cover your current outgoings"

Or, ask yourself the following question to help you initially determine if you need any type of protection insurance ~

There are 3 main types of protection cover

Life Cover - this cover pays out on death or if you are diagnosed with an imminently terminal illness. Often known as term insurance as it usually bought for a set number of years.

Critical Illness Cover - this will pay you a tax free lump sum or income on diagnosis of any one of a wide range of serious illnesses including some forms of cancer, heart attack, stroke, brain tumour.

Income Protection - designed to protect you and your family against the loss of income in the event you suffer a potentially long-term injury or illness. It pays a monthly tax-free income.

Are You Adequately Covered? Find out by answering the following 3 questions...

Free Initial Consultation
If you would like a Free initial consultation from a qualified adviser to discuss your protection needs or check if you are adequately covered, call us on 01522 540555 or simply fill in the enquiry form

Online Quotation - alternatively our online system will compare the costs of protection products for your selected criteria and the results will be displayed in price order. Click the following link for a Quote Now Without Advice

I Get it...Now that You Put it Like that!
Here's a different perspective on protection cover with examples/definitions that will help you appreciate and understand its true purpose, click on links below...

Life Cover: Revolutionary Instate Estate
Critical Illness Cover: Preventing the Vicious Circle
Income Protection: Insuring the Cash Machine

Learn more about Protection Cover

• What is Life Cover
• What is Critical Illness Cover
• What is Income Protection
• The Good news about life expectancy
• How Premiums are calculated
• What is Medical Underwriting
• Terminal illness
• Types of Life Cover& Critical Illness Cover
• What is Waiver of Premium Option
• Family Income Benefit
• Trusts

What is Life Cover?

Life cover pays out on death or if you are diagnosed with an imminently terminal illness. It is also known as term insurance as it usually bought for a set number of years. Term life cover has no cash in value at any time, it is pure protection cover.

Life insurance can either be in the form of a cash lump sum or regular income which is paid to your loved ones if you die during the plan term. It can also be used to pay off a mortgage if you die during the term.

If you live to the end of the term, the policy expires and no payment is made. Similarly, if you stop paying the premiums at any time, cover will cease.

back to questions

What is Critical Illness Cover?

This can be taken on it's own or in conjunction with life insurance, it provides a lump sum or regular income (as family income benefit) on the diagnosis of a specified critical illness during the policy term. The lump sum could pay for things like nursing care, home-help, adapting your house to accommodate a disability; it could pay off your mortgage or give you a holiday to recover from treatment.

Most critical illness policies will cover the most common serious illnesses: Heart Attack, Cancer, Stroke, Kidney Failure, Major Organ Transplant, Coronary Artery By-Pass and Permanent Total Disability.

Other illnesses that most policies will also cover include:

• AIDS and HIV
• Alzheimer's Disease
• Benign Brain Tumour
• Coma
• Creutzfeldt-Jakob Disease (CJD)
• Loss of a limb, sight, speech, hearing
• Multiple Sclerosis
• Paralysis
• Parkinson's Disease
• Motor Neurone Disease
• Free Cover for Children

You will need to check the small print of any policy you take out. For example, AIDS and HIV are often covered in certain specific circumstances only.

back to questions

What is Income Protection

This type of plan will provide an income if you are unable to work through disability, no matter how it is caused. The policy pays a monthly tax-free income until you return to work or the policy term ends.

The payout can be level or set to rise with inflation. It pays as long as doctors agree that you are unable to work for health reasons.

The maximum cover you can have is typically half of your provable income. This is paid tax free, so should you make a claim you will only be a bit worse off than you were before. The insurers limit the amount of cover you can have so that you have an incentive to get back to work!

It can be argued that everyone should have this cover, because the State simply does not provide adequate protection, but many employers do offer it, so check your contract.

Premiums are kept down by setting it up with a "waiting period" between the onset of disability and the income kicking in. In other words, it's not meant for the flu, and the huge majority of claims are caused by back or mental health problems.

back to questions

The Good news about life expectancy
Life insurance is continually getting cheaper as the average life expectancy creeps up, so if you have had a policy for a few years, it's worth getting a quote as you may be able to reduce your premiums. Unfortunately, the opposite it true with critical illness cover, the premiums are gradually creeping up as the amount of claims are on the increase.

back to questions

How Premiums are calculated

The amount of cover (sum assured), the length of the term, and the premiums are all set up at the start. The premiums are based on the following factors -

i) your date of birth ii) whether you smoke iii) your medical history iiii) occupation

All premiums are based on the perceived risk to the insurer, so the older you are the higher the premium. Rates for smokers are higher than non-smokers, also the premiums may increase if you have had previous medical conditions or have a perceived dangerous occupation (e.g. parachute instructor). These factors are assessed by the medical underwriters on receipt of your application.

Policies can be taken as single life cover or joint life cover ~

If a single life is covered, the sum assured will be paid out if:

• you die before the end of the plan term, or
• if (in most cases) you develop a terminal illness at least eighteen months before the end of the plan term.

If you choose a joint-life 'first death' plan, the sum assured will be paid out if:

• either of you dies before the end of the plan term, or
• if (in most cases) either of you develops a terminal illness at least eighteen months before the end of the plan term.

back to questions

What is Medical Underwriting

This is the assessment process of your application by the insurer. An underwriter will assess your case to see if there are any factors increasing the perceived risk to them from the answers to the medical and general questions on the application form. If they require further information they may request a medical report from your GP, this is fairly common practice and nothing to worry about. If they asses the application as higher than standard risk they may increase the premium slightly (known as ‘loading') or decline the application in exceptional circumstances.

back to questions

Terminal illness

This is an illness that is expected to cause death within 12 months, it is generally included in life insurance policies. Insurers will pay out the sum assured if you are diagnosed with a terminal illness at anytime apart from the final 18 months before the end of the plan term.

back to questions

Types of Life Cover & Critical Illness Cover

Both Life and Critical Illness Cover can be bought separately or together, and in the following different ways:

• on a level basis - the cover remains the same for a fixed number of years, a good choice for family protection and "interest-only" mortgages
• on an increasing basis - costs more as the level of cover increases each year in line with inflation. Not so popular, but it should be because people need more cover as inflation and their income rises.
• on a decreasing basis - a cheaper option as the level of cover reduces over the plan period, it is designed this way to protect a repayment mortgage as the debt reduces. Often referred to as mortgage protection.

Once you have chosen between a level, increasing or decreasing policy, you have 2 further options:

• on a guaranteed basis - this is the most common and guarantees the premiums remain the same throughout the whole term.
• on a renewable basis - a short term policy - which makes it cheaper initially, but more expensive long term when renewed as premiums increase. Importantly though, it can be renewed without medical evidence.

back to questions

Waiver of Premium Option

This is form of payment protection built into the premiums should you be unable to work due an accident, illness or disability. With this option the premiums will be paid for you after a certain deferred period (options are usually 4,13,26,52 weeks) until you recover or the policy ends. It usually costs around 1.5% - 3% of your premium and is subject to medical underwriting.

back to questions

Family Income Benefit (Life & critical illness cover only)

These plans are the most cost-effective form of family protection. Rather than producing a lump sum should you die, the policy produces a regular tax free income instead for your dependants for the remainder of the plan term.

This saves cost, tax and a lot of hassle for your family at a tough time. The amount paid each month can be set to rise with inflation, or to remain level over the plan term.

The only catch is that it's payable for a set number of years from when you start the policy, so for example a claim made at the end of year 18 of a 20 year term, it will only pay out for two years. that's why it costs less as the potential payout for the insurer reduces with each month that passes.

back to questions

Trusts

You should seriously consider putting your policy in trust. This means that the proceeds of your cover will be paid in a straightforward way to your dependants without affecting your will, your estate or the taxman.

In most instances, consider a flexible trust, a flexible trust allows you and others to control what happens to the money after your death. At the outset, you decide who is to benefit, and in what proportion.

The great advantage is this. The money is passed directly to your beneficiaries, without reference to your will or the taxman. It speeds up the process of getting the money to your beneficiaries by, on average, six months.

back to questions

Now you put it like that!
Here's a different perspective (ie. using metaphors) on protection cover with definitions to help appreciate and understand its true purpose...

Life Cover (term assurance) ~ Die Rich with the Revolutionary new ‘Instant Estate'

You can now have an Instant Estate for just a few pounds a month. Imagine having to save a couple of hundred grand to leave your loved ones in comfort should you pass on. It will probably take you years and years of sacrifices and savings with your hard earned money to accumulate this.

Now you can buy an instant estate to leave your loved ones as financially secure as you want for just a few pounds each month. All you do is choose the value of the estate you would like to leave them, fill in a form and pay a corresponding premium each month knowing that should something unforeseen happen to you, your instant estate will take care of them.

Wonderful peace of mind while you are alive, loved ones taken care of financially if you die, only when you buy some Instant Estate! (or term life assurance as it's more commonly known).

N.B. A payout would only occur if you die during the term of the policy.

Back to top

Critical Illness Cover ~ Preventing the Vicious Circle

It's a well known, yet unfortunate fact that financial pressures can have a severe effect on those recovering from a serious illness. The ‘cycle' below shows a common scenario following a life changing/critical illness

A life changing/critical illness is usually a time when people want to slow down or reduce their working hours, perhaps switch to a part time position. Critical illness cover allows you to do these options by taking care of your financial burdens.

Back to top

Income Protection ~ Insuring the Cash Machine

Imagine you have a cash machine at home that only operates on the first day of the month. When you press the button on the first day, it produces enough money for you and your family to live comfortably for the month. Every single month without fuss it churns out the money you need. Now, like all machines, it can break down and if it does you won't be able to get any money out. The Question is ~

As your livelihood depends on this machine would you insure against it breaking down?

This scenario is a ‘no brainer' of course you would (I hope!). Unfortunately this machine hasn't been invented yet, but until then, you can insure your Income through income protection insurance.

What happens if you take out the bottom block?