You can get insurance to cover just about anything. While a lot of people understand the importance of home and car insurance, personal insurance such as life insurance is often overlooked. One problem is the array of protection products available, which in itself confuses people, but more importantly most people simply don’t appreciate why they need to take out insurance. The following quick quiz will help you determine whether you may need to take out a personal insurance policy of some kind.
What you need to do
Take the 2 minute personal insurance quiz
First of all, answer yes or no to the following questions:
1. If you or your spouse were to die...
- Can your family or financial dependents cope financially?
- Would they have sufficient assets to meet their financial needs?
- Could they replace lost income?
- Would the survivor be able to pay the mortgage and keep a roof over your children’s heads?
- Would the bills be covered?
- Would your children be financially secure through to adulthood?
- Do you or your spouse have life insurance as part of your work benefits package?
2. If you or your spouse were unable to work due to long term sickness or an accident…
- Would the bills be covered?
- Would the mortgage be paid?
- Are the savings enough to cover your finances until you return to work?
- Could your family live without having to claim benefits?
- Would you or your spouse’s pay-check be able to support the family?
- Do you (or your spouse) already have a policy in place with work that will pay out if you are unable to work for a long time?
3. If you or your spouse were diagnosed with a critical illness such as a type of cancer…
- Would you be able to pay the bills?
- Do you (or your spouse) already have a policy in place with work that will pay out if you are unable to work due to ill health?
- Even if you fully recovered from the illness, would you be able to cope financially if you returned to work?
- If you answered no to the majority of the questions in part 1, then you need to consider taking out a life insurance policy.
- If you answered no to the majority of the questions in part 2, then you need to consider taking out an income protection insurance policy.
- If you answered no to the majority of the questions in part 3, then you need to consider taking out a critical illness policy.
If the result of the quiz was that you should consider taking out life insurance, income protection and/or critical illness insurance then it's important to keep the ball rolling.
To do that you should speak to a competent insurance broker who can find the most suitable policy (or combination of policies) for you and your budget. I've personally vetted the service of a life insurance and business protection specialist which provides a fantastic tailored service and has been rated as 'Excellent' on Trustpilot having received over 10,000 online reviews. I have even used them myself for my own personal and business insurance needs.
They will save you time and money in your search for the best cover available to meet your needs. The first step is to click on the link above, go through to their site and complete the short form to receive a callback (with no obligation to take things further) or you can give them a call. If you are happy with your quote and end up taking a policy with them, you will also qualify for up to £100 cashback.
As a bare minimum, you should make sure you have sufficient life insurance in place - so focus on that first.
The different types of personal insurance explained
Life insurance is overlooked when it comes to protecting families. 8.5 million people in the UK do not have a life insurance policy and of the 11.1 million people who have a mortgage, only 58% of those have a life insurance policy.
A life insurance policy pays out a lump sum on death which can be used to pay an outstanding mortgage and/or provide an income for dependents. It can be quite overwhelming as there are various types but the main aim is to ensure that at least your mortgage is covered in the event of premature death when you take out a policy.
If you are on a repayment mortgage you should look into taking out a decreasing term assurance policy with a term that matches what’s left on your mortgage, and a sum assured matching the debt outstanding at the time of taking out the insurance. If you have an interest-only mortgage you should look into taking out a level term assurance policy with a term that matches the number of years left on your mortgage, and a sum assured matching the mortgage amount balance.
When is life insurance a good idea?
- Clear an outstanding mortgage so that you can leave your family with a house to live in mortgage-free.
- To pay any outstanding debts or cover funeral costs
- To pay a potential Inheritance Tax (IHT) bill payable on your estate, therefore ensuring your dependents receive more of your assets.
- To provide an income or capital sum for your dependents in the event of your death.
If you want to know a little more about life insurance and want to compare the best 10 life insurance providers in the UK, check out our article 'Compare the best life insurance providers in the UK'.
Income protection insurance
Income protection insurance is one of the most under-utilised types of insurance with most people overlooking the benefits and importance of protecting their income. For example if you or your spouse became ill or injured and were unable to return to work for a few months or years would you have enough money to cover your monthly outgoings? In this situation, an income protection policy would pay out until you or your spouse returned to work allowing you to cover your monthly outgoings preventing financial turmoil.
Income protection is generally a long-term policy that will pay out until retirement or the policy cover ends. It is worth bearing in mind that income protection insurance doesn't cover any pre-existing illnesses or injuries so will not pay out if these prevent you from working in the future. Normally you would look to set the duration of the policy to last until the age at which you plan to retire with a benefit level equivalent to two-thirds of your monthly income.
When is income protection insurance a good idea?
- If your company only pays statutory sick pay
- If you only receive full pay for a limited time
- You are self-employed
- To ensure living expenses are covered if you cannot work
If you want to know a little more about income protection insurance and want to compare the best 10 income protection insurance providers in the UK, check out our article 'Compare the best income protection insurance policies in the UK'.
Critical illness insurance
Critical illness insurance is a long-term policy that will pay a lump sum if you are diagnosed with one or more of the critical illnesses detailed in the policy. If claimed the lump sum can also be used to provide a regular income and is designed to pay off your monthly outgoings as well as help to make amendments that may be needed to your home, e.g wheelchair access. Typical illnesses covered by critical illness policies are heart attack, stroke, most cancers and multiple sclerosis but all illnesses have to be judged for seriousness to qualify for a payout.
When is critical illness insurance a good idea?
- To provide finances to support your family
- To provide peace of mind to you and your family
- To give you a lump sum if you happen to fall critically ill
If you want to know a little more about critical illness insurance and want to compare the best 10 critical illness insurance providers in the UK, check out our article 'Compare the critical illness insurance policies in the UK'.