Life cover is the most widespread form of Protection, but other misfortunes may hit you along the way, so it makes sense to consider plans that protect you in this respect too.
A question that may be posed is ‘would you rather lose your Home or your Mortgage’? Of course, the likelihood is that you may never face this issue – but some do. Also, you may not need a policy that’s designed to pay off the whole mortgage – but some do.
Additionally, those that are renting should not be immune to questions about their financial obligations, particularly as the monthly cost of renting tends to be greater than funding a mortgage for a similar property type.
So, for both homeowners and renters, it makes sense to consider policies – in addition to life cover – that may protect you against misfortune along the way.
For example, you could suffer a serious illness, which may massively affect your health and livelihood. For this reason there are Critical Illness plans out there to deliver a lump-sum payout should you suffer from conditions such as heart attack, cancer or stroke – as long as the illness is specified in the policy. In this instance, you may not require a sum large enough to help pay off the mortgage, but it could make a big difference and help you along the way by lowering your outgoings, whilst you try to get back on your feet.
Alternatively, you may suffer an injury or illness that means you’re unable to swiftly return to work – if at all. In this respect you could consider a long-term Income Protection policy, which is generally designed to pay out a regular income (rather than a lump-sum) until such time that you return to work, or even until you retire!
The State or my Employer will look after me
Before taking up any protection policy it’s essential that you find out what your employer may offer you – as there is no point in duplicating your cover. You may be fortunate, but as economic conditions have impacted over the last decade or so, you might also find that your employer has become less generous. Separately, if you are part of the 4.8m workers that are self-employed*, your exposure is probably even more pronounced!
The next port of call is the support you may get from the state. Again, this may also not be as generous as it was a few years back.
Statutory Sick Pay, for example, is just £89.35 a week, paid for up to 28 weeks if you qualify. This is less than one-fifth of the average weekly wage of around £500*, which could leave a big shortfall in a person’s finances.
Elsewhere, a possible back-up is ‘Support for Mortgage Interest’ (SMI). This is a means-tested benefit that would pay your mortgage interest up to a threshold amount (dependent on other claims). However, you have to wait 39 weeks before it starts, and there are plans to turn SMI into a loan.
Overall, you may be surprised by how much you may fall short when thinking about your financial obligations and balancing that against what you may secure from your employer and the state, so it makes sense to have a chat with us to discuss the way forward.
(Source: *Office for National Statistics, UK Labour Market, June 2017 release)
As with all insurance policies, terms, conditions and exclusions will apply.