It can be hard keeping up with the pace of life in the present, without dwelling on the “what if…” scenarios.
But some planning now could save you and your family from a huge financial headache in the future.
The game plan is for us all to live a long, healthy and happy life. Unfortunately things don’t always go to plan. While the majority of our energy is devoted to the positive side of life – careers and bringing up a family – it is important to spend some time considering what the financial consequences might be if things go wrong.
The first thing you should do is sit down and review your life plan. This will help you to pinpoint your insurance priorities. Some points to consider:
- How much do you or your partner contribute to the household?
- How long would that need to be replaced in the event of illness or death?
- What are your liabilities? And would you want them repaid on death?
Four types of insurance
Here’s a break-down of the four main types of insurance you can opt for when protecting against illness or death.
1. Lump sum Life Insurance
This would provide a lump sum to your family if you were to die. For a 30 year old female non-smoker, life insurance of £250,000 would cost less than £10 per month.
2. Income Life Insurance (aka Family Income Benefit)
This provides a regular income to your family for a set period of time – typically till children are no longer dependent. Using the same example above, income of £20,000 per year for 25 years would also cost less than £10 per month.
3. Critical illness Insurance
This would provide you with a lump sum if you were diagnosed with a ‘critical illness’. This is more expensive than life insurance because when you’re young, you are statistically more likely to be diagnosed with a critical illness than you are to die. It would cost the same 30 year old female around £24 per month for critical illness insurance of £100,000 for 25 years.
4. Income Protection insurance
This is an insurance policy that replaces your income in the event of illness. If you are working, you can insure yourself for up to 60% of your salary. If you are a full time mother, you can insure yourself for up to £1,200 per month. This would cost around £28 per month.
This type of cover is different to Critical Illness Cover. The benefit would pay out to you if you were suffering from any illness that prevented you from doing your job as a mother, e.g. depression, back problems, childbirth complications etc.