There are a few different types of protection insurance available. You might want just one type or you might want a mix of cover – it all depends on your circumstances, your family obligations, your mortgage and loan obligations and your earning capacity.
Life Cover pays out a lump sum in the event of your death. Life cover forms the cornerstone of most families’ financial protection and it would be an important consideration for anyone with a partner or children. Your family would normally be the beneficiaries of a life cover policy.
Mortgage Protection Cover is another form of life cover in that it pays out a lump sum, but the beneficiary of the policy would be the bank who hold your mortgage. Mortgage protection costs less than a level life cover policy as the amount of cover reduces over the life of the policy, to reflect the fact that your mortgage balance is also reducing over the same timeframe.
Serious Illness Cover is a policy that would benefit you personally in the event of a claim, as well as your family. This type of policy pays out a lump sum in the event that you are diagnosed with one of the serious illnesses covered by the policy, e.g. a stroke, cancer or heart attack. The lump sum paid out can be used for anything you wish, but some of the areas where it would help would be for living expenses, increased medical expenses and writing off loans.
Income Protection Cover replaces part of your income if you find yourself unable to work due to injury or illness. Self-employed people are particularly vulnerable to loss of earnings through illness as they are not entitled to State illness benefit. Public sector workers are also more commonly arranging their own private cover as public sector sick leave benefits have reduced in recent time. Income protection provides you with a regular replacement income for as long as it takes for you to be fit enough to return to work, and this is a key difference between income protection and the likes of serious illness cover which is a once-off lump sum payment.
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