Financial products are sometimes at their most useful when they are protecting our families, our incomes or our property.
Whilst insuring ourselves against an undesirable event such as sickness or even death may not be a pleasant thing to think about, the benefit of being able to set financial issues aside at emotionally difficult times cannot be overlooked.
There are many ways in which a family can protect itself, and because of the large range of products available there is usually an appropriate policy for most circumstances, and most budgets.
There are many different ways to protect your family and your standard of living when you need it most. Click on the different protection options on the main menu to learn more about these.
If you need convincing that life insurance is a good product to buy, ask yourself this question. If you were to die, how much money would your family have to live on? Many families would find themselves running short of money very quickly. Your salary would stop, but the household bills and mortgage repayments would still need to be paid.
A payout from a policy could make the difference between your loved ones facing a financial struggle at a challenging and emotional period in their lives, and being able to maintain the sort of lifestyle they enjoyed when you were still around.
Most people tailor their policy to ensure that their financial commitments would be met in the event of their death, so policies are often aligned with the term of a mortgage or other loan.
Life insurance isn’t the only form of protection policy you can take out. There are some other policy types that families with mortgages often consider.
State benefits often aren’t very generous in this area and only a few employers will continue to support their staff through a long term illness, so income protection policies can help families through difficult financial times.
You can choose the date at which the policy would pay out in the event of a claim. This can range from a month to up to a year. Policies that pay out sooner will have higher premiums.
Many people buy a combined life and critical illness policy, and it often makes sense to do so. In this case, a payment would be made on either diagnosis of a critical illness, or death, whichever is the sooner. If the cover is combined in this way, the policy premium is usually cheaper than it would be for separate policies, as there is only ever one lump sum paid out by the insurance company.
Parents of young children often consider this type of policy, and take it out jointly, as it means that if one of them were to die during the term of the policy, then an income would be paid out for a pre-determined period. So, for example, if you had a 20-year policy and were to die five years into it, then the policy would pay out a regular income for the remaining 15 years.
This type of policy can also be combined with critical illness cover.
In addition, the payment wouldn’t have to wait until the grant of probate (the legal document required to administer your estate) has been granted. Obtaining probate can be a lengthy and time-consuming process, but if a policy is written in trust, the proceeds can be paid out once a death certificate has been obtained.
By contrast, a ‘joint’ policy covers two lives, normally on what’s referred to as a ‘first death’ basis. This means that the policy pays out if during its term one of the policyholders dies. As the policy is designed to pay out only once, it will come to an end. So, in this case, the surviving partner would no longer have any life cover under this policy. If instead each had their own policy, the survivor would still have life cover in place.