Insurance

Life insurance, critical illness, income protection, payment protection and private medical insurance

Life insurance

Life insurance pays your dependants a lump sum or regular payments if you die.

Do you need it?

Yes, if your children or partner depend on your income to cover the mortgage or other living expenses.

Check whether you have an employee package that includes ‘death in service’ benefits, if so, you might not need more life insurance or maybe just a top-up.

If you are young and healthy, life insurance is very good value for money – providing high cover at a relatively low cost.

It only covers death – it will not cover you if you cannot work due to illness or disability.

Existing medical conditions might not be covered and – if you have a serious health problem – you might not be able to get cover or only at a high cost.

Critical illness insurance

It pays a ‘lump sum’ (or some policies will pay an income) if you are diagnosed with a specific serious illness, for example:

  • Heart attack
  • Stroke
  • Certain types and stages of cancer
  • Conditions such as multiple sclerosis

Most policies will also pay out if you’re permanently and totally disabled after an injury or illness.

Do you need it?

It is not as important as life insurance, but you might need it if you and your family depend on your income to cover the mortgage or other living expenses.

Check whether you have an employee package that provides an income if you cannot work for a long period – you might not need critical illness cover.

If you could not support yourself and your dependants if you were too ill to work, then you should consider critical illness or income protection cover.

If you can afford it – you can buy a combined life and critical illness policy.

A pay out can make a big difference when you need it most, for example you could use it to pay off your mortgage.

Some cancers and ‘chronic’ conditions might not be covered, even if they mean you cannot work.

Health problems you had before you took out the insurance are very unlikely to be covered.

Income protection insurance

Income protection insurance pays a percentage of your take-home pay if you cannot work for a while because you are ill or disabled. It covers most illnesses that leave you unable to work. It does not cover you for unemployment.

Do you need it?

You should consider it if you cannot rely on savings or employee benefits to see you through an illness.

You are most likely to need it if you are self-employed, or you do not have occupational sick pay or savings to fall back on.

Your living expenses and bills should be covered until you can start working again or retire – depending on the term of the policy.

You can claim as many times as you need to while the policy lasts.

Beware different definitions of ‘unable to work’ this will mean different things in different policies – get advice before buying.

You might not get cover if you have existing health problems or a dangerous job.

Mortgage protection insurance

Covers your monthly mortgage repayments in case you:

  • Have an accident.
  • Become ill and cannot work, or
  • Become unemployed. 

Usually, it will not cover you:

  • For pre-existing conditions.
  • If you are self-employed, a temp or contractor.
  • If you are retired or unemployed.
  • If you lose your job within 3–6 months of taking out the policy.

Do you need it?

You probably do not need it if:

  • You could get by on your sick pay or redundancy pay.
  • You have enough savings to cover your repayments.
  • Your partner could cover the mortgage and other loan repayments.
  • You are young, single, in good health, and only have spare cash for basic insurance.

It can ease your money problems if:

  • You are made redundant and are likely to be out of work for a long time.
  • If you’ve little or no savings and quite a lot of debt.

Other factors:

  • You might have to wait up to 90 days before you can claim.
  • It will only pay out for a limited time (say 12 months) even if your illness or period of unemployment lasts longer.

 

 

 

Private medical insurance

Health insurance reimburses the cost of all or some of your medical bills if you pay for your own healthcare.

Basic private medical insurance covers most in-patient treatments (tests and surgery) and day-care surgery. Some policies also cover out-patient treatments (such as specialists and consultants).

It does not usually cover treatment for:

  • Pre-existing medical conditions
  • Chronic illnesses such as diabetes, mental health issues and depression
  • Cosmetic surgery
  • Routine check-ups
  • Pregnancy

Do you need it?

You get free treatment on the NHS, so you only need private medical insurance if:

  • You think you might need treatment you cannot get on the NHS, like specialist surgery for sports-related injuries, or certain cancer drugs or treatment.
  • You just do not want to use the NHS and would prefer to stick to private hospitals and clinics where possible.

Other factors to consider:

  • You can ask your GP to refer you to a private expert or specialist.
  • If the NHS will not let you have a scan or makes you wait, you can use your cover to pay for it.
  • You can use your insurance to reduce the time you spend waiting for NHS treatment.
  • It can be expensive, depending on what types of treatment you want to be covered for
  • Premiums rise every year, and with age, so by the time you are older and more likely to need hospital treatment, you might not be able to afford the premiums.