From pets to travel plans, most people are used to arranging insurance for the things we value. But when it comes to more significant policies like life insurance, income protection insurance and critical illness cover, many of us leave ourselves and our loved ones vulnerable by failing to arrange adequate protection.

Here are some of the most common questions we hear on protection and insurance. If you’re unsure about how best to protect yourself and your loved ones, why not chat to a member of our award-winning team?  

Do I Need Protection Insurance?

While we all like to hope the worst won’t happen, it’s always wise to have plans in place to protect yourself and your loved ones. Responsible financial planning includes making contingencies for the loss of your income through accident, illness or death, no matter how remote those prospects may seem.

Protection policies can prevent your family from falling behind on obligations such as fixed bills, rent and mortgage payments if your income is no longer available.

Some people may enjoy limited cover through an employee benefits package, however this is unlikely to be tailored to your personal circumstances, and may provide a lower sum than you require. Coupled with the fact that, according to the Department for Work and Pension, UK workers have 11 employers on average over the course of their career, arranging bespoke protection which isn’t tied to one particular job can offer greater peace of mind. 

For those hoping to rely on family or a partner in place of protection insurance, it’s important to note that circumstances change, and the people and resources you’re relying on may not be available when the time comes. And even with the best of intentions, your loved ones may not have the ability to sustainably support you long-term.

If I Get Insurance, Is It Likely To Pay Out?

The cynic in us might wonder if it’s likely that we’ll receive a payout when we need one, but the data shows that it’s very likely that we will.

The Association of British Insurers (ABI) report that in 2021, the UK insurance industry paid out a record sum of £6.8 billion in protection claims including life insurance, income protection and critical illness cover, meaning that 98% of all protection claims resulted in a payout.

According to the ABI, the average UK life insurance payout amounts to £80,485, while income protection claims paid out on average £23,380. Insurer L&G reports that in 2021, the average critical illness payout for a policyholder aged 50-59 was £56,454.

The most common reason for a claim not to result in a payout is non-disclosure, where the policyholder has failed to inform the insurer about relevant information, so it’s essential to give clear and complete information when arranging cover.

Will Protection Insurance Be Expensive?

The cost of your premiums will depend on the level of cover you choose as well as factors such as your health and age. Price comparison site Insurance Hero reports than a 45 year-old healthy non-smoker may pay around £17.37 for life insurance of £100,000, with the premium rising to £28.82 if they were aged 50.

By shopping around and adjusting the level of desired cover – for example by shortening the term or lowering the value of the policy – you can find cover to fit your budget, and an independent insurance broker like McCrea can help you find the right deal for your needs.

Can I Get Cover If I’m At Higher Risk?

Yes, you can access protection policies even when you’re at higher risk, and although the premiums may cost more, the value of the protection and peace of mind are well worth the investment.

Those aged over 50, people with pre-existing medical conditions and people in high-risk employment – particularly the self-employed – are advised to shop around for the most appropriate cover, and an independent specialist like McCrea can guide you through this process and advise on the most appropriate protection for your unique needs.

Is It Worth Getting Protection If I Work Part-Time?

If the amount you earn from working part-time is more than you would earn in benefits if you became unable to work, then income protection insurance would be a worthwhile investment. Even in a two-income household, an accident or illness may prevent you not only from continuing to work but also from being able to contribute to childcare and other family obligations. In those circumstances, a partner may need to scale back their working commitments to compensate, or the family may need to hire outside help, making the payout from a protection claim all the more valuable.

Similarly, life insurance is a wise investment for anyone with loved ones relying on their income, whether in a one or two income household and working full or part-time hours.

Will Any Insurance Payout Be Taxed?

Successful claims on life insurance, income protection and critical illness cover are not generally subject to income tax in the UK. Money received from claims on these policies will count towards the calculation of the value of your estate, which may be subject to inheritance tax after you die. Our expert advisers can not only help you source the appropriate cover, but also help in making claims and re-arranging your finances after a successful claim to maximise the benefit you can enjoy now while preserving the legacy you can leave to your loved ones.

Still Have Questions About The Value of Insurance and Protection?

Our Protection expert Ged Cumming can offer personalised advice on the best solutions for your circumstances – why not give us a call or arrange a no-obligation chat today?