It is a sad fact that while most of us are quite happy to insure our car, our house, our travel arrangements – even our mobile phones – to their full value, but few of us take quite as much care over our own health and that of our loved ones.

 According to figures produced by the Association of British Insurers (ABI), 19.3 million of the UK’s 26.5 million households had contents insurance in 2019, whereas only 4.8 million had whole-of-life assurance, 0.6 million had term life insurance and only 0.2 million had income protection insurance. This guide is designed to highlight the issues that might concern you and introduce you to the different types of cover available to help secure your family’s future. We outline the different types of insurance and what they could provide and try to give you a basic idea of how to work out the sort of cover you might need.

If any of the information needs further explanation, or you need more details on how your own situation might be best served, please do not hesitate to give us a call on the number enclosed.

Why income protection?

It is true that not everyone needs cover. Life insurance, for example, pays out a lump sum on death. For a family with small children, the need for this cover is obvious. Remove the family’s main breadwinner, for example, and it would not take very long before the financial stability of the family was seriously affected. Remove the primary carer, and a replacement needs to be found.

However, if you are single and have no financial dependants, you might consider it a waste of time leaving a lump sum that is unnecessary and will just cost you money to fund. Nevertheless, if you are single, you should still consider what would happen if you fall ill or have an accident and are unable to work. The state benefits available are only intended to provide a safety net. They will not help you keep up a lifestyle of holidays and eating out or make any inroads into repaying a mortgage.

Therefore, before you make any decisions, you need to look at your own situation. Some of the following questions may help you to start prioritising what is most important to you:

• Do you have young children or others who depend on you financially?
• How old are your dependants?
• Will your dependants be heading to university?
• Do you pay school fees or nursing-home fees for others?
• Will any current dependants become financially independent and if so, how soon will that be?
• Do you have debts (including a mortgage) that your beneficiaries could not manage, even if it were only for a short time?
• Do you have investments that might provide an income if you were unable to work?

Do you have any assets that could be sold if you were unable to work?

• Would you need to move house if you were less mobile?
• How do you travel about?
• How far are you from friends, relatives and local amenities?

Income protection insurance

Regardless of whether you are single or have several financial dependants, your income is likely to disappear completely if you are suddenly unable to work. This will have a direct impact on both you and those around you.

Income protection insurance (IPI – formerly known as “permanent health insurance”) is less well known than life assurance but is just as important. In the event that you have an accident or contract a serious illness and are unable to work, IPI is designed to cover a proportion of the income you lose. This income is paid until the end of the policy term, or until you are able to return to work, whichever comes first. Consequently, while you are rehabilitating or coming to terms with changes in your life, you can be reassured your financial position will be unaffected and that the bills will continue to be paid.

This type of policy can be of particular benefit if you are self-employed or if your job does not come with any sick pay or protection scheme benefits (of which this form of cover can sometimes be a part).

IPI can seem expensive; however, there are different price bases from which to choose. The premiums paid on a guaranteed policy will remain unchanged, whereas a reviewable policy will be cheaper at first, but the premiums will be reviewed every few years.

There are also policies that take into account lifestyle factors and higher-risk occupations; the premiums on these policies are relatively inexpensive at first, but will rise each year by an agreed amount.

For further information, or to arrange a no obligation appointment, contact us today by telephone on 01626 242500 or email enquiries@wbwcfp.co.uk.

WBW has offices in Torquay, Paignton, Newton Abbot, Exeter, Bovey Tracey,  Exmouth,  Honiton,  Sidmouth,  Launceston,  Axminster, Chard and Seaton.

This article is intended to provide information only and reflects our understanding of legislation at the time of writing. Before you make any decision, we suggest you take professional financial advice.