Protection: Life, Income Replacement and Critical Illness

As well as being one of the UK's largest no-fee mortgage brokers, L&C Mortgages is also a specialist in protection matters whether mortgage related or not. 

The Basics
Broadly speaking, there are 3 main types of protection policies. Each of these is specifically designed to protect different eventualities. They can be summarised as the following:

Life
The ideal purpose of any policy that pays out upon death, is to ensure that surviving dependants receive a sufficient lump sum or income to enable them to maintain the standard of living they are accustomed to. Cover should total no less than your outstanding mortgage, plus any other lump sum liabilities (i.e. personal loans, credit cards etc). A straightforward Term policy is usually the best and cheapest way of providing this most basic need.

Income Replacement
Should you lose your ability to work (and therefore the ability to earn sufficient income) you would still require an income in order to meet your normal living expenses. The cover taken should be at least equal to the tax-free income that you would require each month in the event that you lost your earned income (subject to a maximum permitted amount of 50% of your earnings). The benefits would normally commence after an initial 'waiting' period of 1-12 months (set at outset by you) and would continue until you reach your retirement age, or until you return to work (whichever occurs first). Permanent Health Insurance (PHI) is the best way of providing this replacement income and is an essential for those whose employers do not provide it, or anyone who is self employed.

Critical Illness
Critical illness policies pay out if you suffer from a serious illness, like a heart attack, stroke or cancer. The aim is that the payout should ease any financial worries that you might face during recuperation. In many ways, this is the icing on the "protection" cake. Policies that provide this cover will pay out a lump sum or income on diagnosis and survival of a critical illness. The principle benefit of this policy is that the pay out should ensure that your recuperation is not hindered by stressful financial worries. Often a small amount of this cover is sufficient.

Do you already have cover?
If you already have life cover in place, we may be able to save you money or give you more cover than you presently have - for the same price.

The cost of life cover has dropped in recent years. Generally, if you are paying in excess of £30, are in good health and have had cover for at least 3 years, it is likely that you are currently paying too much.

Useful link:

The Association of British Insurers
The trade body for insurance companies, with both broker and consumer information.
http://www.abi.org.uk/