In this article, we will look at life insurance for teachers - how to work out what you need, what it will cost and how to factor in your teachers' death benefits. We will also look at critical illness and income protection insurance for teachers and how these can enhance the Burgundy Book sick pay structure.
Life insurance for teachers
Teachers will usually have no problem arranging life insurance through most good life insurance companies.
A standard life insurance application will ask you about your specific occupation as well as any activities that you take part in. Hazardous environments of work or travel to areas of risk may prompt the life insurance company to look at your application more closely and charge a price in line with anything they deem to add risk to your life. This is unusual for most teachers, lecturers and other educational staff as their place of work is usually a safe one.
Teachers usually receive a death grant as part of their teachers' pension arrangement. It is a good idea to take stock of how much money would be paid out to your family from the teachers' death grant and how this stacks up against what you might need so that you can work out any shortfalls. Making the most of the free benefits through the death grant will reduce the cost of any personal life or illness insurances that you need.
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Which life insurance is best for teachers
Teachers looking for personal life insurance should assess their personal needs before buying. People usually buy life insurance to protect the people who rely on them financially from financial hardship. The life insurance would provide a sum of money to pay towards:
- Debts
- Mortgage
- Living expenses
- Funeral expenses
- Inheritance tax
An assessment of how the loss of your income will affect the people you leave behind gives you a good steer in terms of the amount of life cover your family will need. Those who need extra guidance may want to read our article "How much life insurance do you need?".
There are, however, specific types of life insurance that are cost-effective and designed to pay off mortgages as well as policies that provide an income to cover living expenses. These are called term life insurance policies and cover you for the period of your life that you are likely to be worried about leaving money for your family or to pay off debts such as a mortgage. Tailored solutions are usually cheaper because they can be adjusted around the benefits you receive free of charge through your employment and so you only cover what is needed.
Buying the right life insurance for what you need can be a difficult thing to work out and most people struggle to make the best choices without some assistance. You can read more about choosing the right type of life insurance in our article "Which life insurance is best for me?"
You can also speak with a specialist life insurance adviser* who will be able to recommend the right life insurance at the best price for you. This takes a lot of the work out of buying your life insurance and they will arrange a trust so that you can nominate your beneficiaries and avoid any tax implications upon claim too.
How much does teachers' life insurance cost?
Life insurance costs vary depending on your personal circumstances and what you need. Tailoring your life insurance around your free death in service benefits can save you money by limiting what you need.
The cost of life insurance is lowest when you are young and healthy so it is wise to buy it as early in your career as possible. The monthly premiums then become fixed for the duration of your insurance as they are not subject to annual renewals like most other insurance products.
Your monthly premium for your life insurance is based on how much it will pay out as well as how long you wish to be insured for. Your personal details that affect the exact price that you pay monthly are your:
- Age
- Smoker status
- Health
- Lifestyle
Cost of £250,000 of level life insurance over 25 years
| Age | Non-Smoker Monthly Premium | Smoker Monthly Premium |
| 25 | £5.82 | £9.80 |
| 35 | £10.50 | £20.06 |
| 45 | £22.58 | £54.76 |
| 55 | £60.02 | £162.68 |
Life insurance premiums vary in price so it is a good idea to shop around to find the best and cheapest life insurance provider. However, what most people don't realise is that the price that is quoted can change after you apply because of how you answer the application questions - often because of how you have answered the health or lifestyle-related questions. You will find that the life insurance companies that are cheapest initially may charge the largest increases due to any health and lifestyle disclosures. Speaking to a life insurance specialist* allows you to pre-empt this as they have knowledge of which insurance companies make fairer assessments. This helps you to select the policy and company that will give you the best actual monthly price you end up paying, rather than just the best quote.
Do teachers get life insurance?
Teachers usually get life insurance in the form of death in service benefit, referred to as a death grant. It accompanies your teacher's pension and is designed to pay a lump sum if you die during service.
How much will your teachers' death grant pay out?
There are specific criteria around how much will be paid according to your employment profile but it is usually a multiple of your salary paid as a tax-free lump sum. Here I have explained how this works but you should read more information on the Teachers Pension website.
- Career Average arrangement - 3 times your full-time salary when you die
- Final Salary arrangement - 3 times the average final salary when you die
- In Additional Service - 3 times your full-time salary less any lump sums already received
A death benefit is available to a teacher who has left service but still qualifies for a teachers pension benefit as well as a teacher who has retired from employment. These benefits are worked out using different criteria and can be found at www.teacherspension.co.uk
Who will receive your death in service benefit?
If you die, your death benefit will be paid to your beneficiaries if you have completed a nomination form. You can nominate one or more people (not a trust or a charity) and allocate how your death benefits are to be split between them. If you do not nominate a beneficiary then the money is paid to your next of kin and if there is nobody to benefit the money will be paid to your estate.
It is important to ensure that your nomination form is reviewed regularly through your teachers pension scheme to keep your wishes updated in line with any changes in your life.
Critical illness insurance for teachers
Critical illness insurance is a type of personal insurance that pays a lump sum if you are diagnosed with a serious illness. This type of cover is very useful if you were to become seriously ill because it provides you with a tax-free lump sum of money that can be used for medical treatment; alterations to lifestyle and can even help to reduce any debts. It is designed to relieve the financial burden caused by extensive time off work due to treatment and/or recovery periods.
A critical illness insurance policy protects you in the event that you are diagnosed with one of a number of very serious illnesses. The policies list the illnesses that are covered by your insurance company and are quite specific in nature. Each illness is accompanied by a definition that helps the policyholder to understand when a claim can be made.
The most common claims are for illnesses such as cancers, heart attacks and strokes. The policy can even provide protection in case your child is diagnosed with a serious illness and this type of claim is one of the top five reasons for claims.
Critical illness insurance is available for teachers and can be a very useful supplement to sick pay if you become seriously ill.
Not all critical illness policies include the same illnesses within their lists and so it is wise to shop around for the most comprehensive critical illness cover policies at the best prices. You can read more about critical illness and how to buy this in the article "Best and cheapest critical illness cover in the UK"
Income protection for teachers
Losing your income if you become incapacitated and can't work can cause immediate financial suffering depending on the savings and support you have access to.
As a teacher, you will receive some sick pay for a predetermined number of months after which that amount may continue for some more months at a reduced amount. You may have income security for up to 12 months in a best-case scenario but after this period you would normally stop receiving sick pay. There are options to take ill-health retirement as a teacher and/or apply for other state benefits such as employment support allowance or universal credit to see if you qualify.
Teachers' sick pay benefits summary
- 1st year of service - full pay for 25 working days and, after completing four calendar months’ service, half pay for 50 working days.
- 2nd year of service - full pay for 50 working days and half pay for 50 working days.
- 3rd year of service - full pay for 75 working days and half pay for 75 working days.
- 4th year and thereafter - full pay for 100 working days and half pay for 100 working days
(source: www.neu.org.uk)
Long-term illness can be financially devastating as it affects your income and your ability to meet your financial commitments.
Statutory sick pay will provide you with £109.40 per week for up to 28 weeks beyond any sick pay benefit you may be entitled to through your employer. It forms part of the full sick pay that you receive under the teachers' sick pay benefits - sometimes referred to as the Burgundy Book benefit scheme - but is paid in addition to any half pay that you receive. It is particularly significant in the early years of service when sick pay runs out sooner.
One of the more common reasons for teachers claiming on an income protection policy is stress as well as some other mental health conditions.
How does sick pay insurance for teachers work?
What income protection insurance does, is it provides you with an income whilst you are unable to work and are not receiving your employer's sick pay. The policies can be tailored around your sick pay entitlement, meaning they only kick in once you run out of sick pay. This makes your insurance cheaper than it would be for someone who doesn't get sick pay, helping you save money.
You can insure up to 70% of your gross earnings. This allows you to focus on recovering and so in a worst-case scenario of you being unable to return to work due to your illness, your income would continue.
The teaching occupation is linked with higher levels of absence from work due to stress. Due to this higher claims experience, some insurance companies may charge more or offer restrictive products when it comes to income protection insurance. However, there are specialist income protection insurance companies that will provide good rates and comprehensive insurance for teachers. These may not be available through normal comparison sites - instead, you should speak with a specialist income protection advisor*.
How to buy the best life insurance for teachers
Choosing the right life insurance for your personal needs can be a tricky task. Often comparison sites will expect you to choose the parameters of the insurance as well as the right products. This leaves you with no safeguards in place if you make poor choices. For this reason it is wise to speak with a specialist life insurance advisor* who can understand your personal requirements and advise you accordingly for free.
These advisors have access to the whole market and will also find the best rates without compromising on the quality of the cover. A regulated personal insurance advisor must accept responsibility for providing you with appropriate advice and you'll gain access to the financial ombudsman service should you find that the advice did not meet your requirements. This provides good peace of mind when making your decisions.
Specialist life insurance advisors have access to the whole market and can find tailored solutions to reduce costs whilst maximising the benefits from your insurance. Tied brokers and comparison sites tend to favour a handful of larger insurance companies who may not provide enough flexibility to tailor your insurance for your budget and needs.
Furthermore, the adviser will be able to provide you with support and guidance to nominate your beneficiaries so that any claim benefits reach the right people. Doing this will also avoid any inheritance tax being applied to the monies if your estate exceeds the inheritance tax threshold. Additionally, you'll qualify for up to £100 cashback when you take out a policy using the above link.
If a link has an * beside it this means that it is an affiliated link. If you go via the link, Money to the Masses may receive a small fee which helps keep Money to the Masses free to use. This link can be used if you do not wish to help Money to the Masses and do not wish to qualify for the cashback referred to in the article