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General Information

What are the various types of covers? 

Having the right type of cover is as important as having cover in the first place. Many people are aware of protection insurance but do not understand the risks of not having suitable cover. This guide helps ensure you make the right choice by explaining 5 key areas of cover: Life Insurance, Critical Illness Cover, Income Protection Family Income Protection and Whole of Life cover. 

Life Insurance

This type of cover is the simplest form of protection for you and your family. It allows you to protect yourself for an amount of cover specified at the start of the policy against Death or Terminal Illness within the policy term. Typically, Life insurance is a Death Benefit paid to beneficiaries upon the insured’s death. This cover type can be used to cover anything from a mortgage liability to your family’s future requirements such as university fees for your children or a ‘nest egg’ provided to your family. 

Critical Illness Cover

This area of cover is usually added to a Life insurance policy (although it can be taken out on its own as a standalone policy). It is not too dissimilar to Life Insurance; however, it provides one major upgrade, the ability to be covered in the event you suffer from a Critical/Serious illness and survive. With advancements in medical procedures, treatment and diagnostic equipment, many people now survive a Critical Illnesses. Unfortunately, this may leave a lasting impact on a person’s standard of living and/or require extended periods of time off work to focus on recovery or the harsh reality of never being able to work again. This would inevitably lead to financial struggles with everyday bills and household expenditures continuing. Having Critical Illness cover can offer financial security, allowing you to focus on recovery. 

Income Protection

This area of cover is viewed as one of the most comprehensive. It is designed to pay a monthly tax-free sum to an individual should that person not be able to work due to an accident, sickness or injury. The policy can be designed to act as a long-term lost income policy and continues to pay the claimant until either they return to work, retire or in a worst-case scenario, pass away. The amount of cover you can receive does not replicate the exact amount of money you earn, instead, it pays a significant proportion of lost earnings (typically around 60% – this can vary between providers). The significant difference between Income Protection and Critical illness coverage is that this policy covers a wider range of conditions. Certain policy types will cover you no matter the accident/illness if you are unable to do your exact working role. This type of cover is especially important to a large majority of households as loss of income can cause significant financial struggles and worries. These struggles can be relaxed or totally removed by having Income Protection. 

Family Income Benefit

This plan is a type of term life insurance that would be paid out in the event of the policyholder dying or having a critical illness (if included in the plan). Similar to income protection, rather than pay out a lump sum, it is designed to pay out a tax-free monthly payment over the term of the policy should a claim arise. An example would be someone wishing to make sure their remaining partner and children would receive for example £3,000 per month until the youngest child has finished their education.

Whole Of Life Cover

This is a plan that is guaranteed to pay out no matter how long you live. Standard life insurance cover can only be termed until a maximum of 90 years of age but this plan does not take this into account. Due to this plan being guaranteed to be paid out (subject to underwriting) the cost of whole-of-life cover will be higher than standard life insurance.

Are there any additional benefits provided by the insurer?

This depends on the insurer and policy you take out. Most providers offer some form of support service, this will be covered in the insurer’s Key Facts document. There are a few typical additional added benefits you can choose to include on your policy, I have listed the main benefits below: 

Waiver of Premium

This is an optional extra (added at a small cost) which ensures that the insurance company will pay your monthly premiums on your behalf if you are unable to work due to sickness or injury after a period of time (normally 6 months). It offers support to ensure the policy does not result in being cancelled during a time of financial insecurity. 

Indexation

This is an option to help safeguard the amount of cover against inflation across the duration of your policy. Each year the insurer will give you the option to increase your cover (naturally the premium will also increase). The cover is reviewed in line with inflation. The important part of this is that you do not need to provide any additional medical evidence or information. Your choice will not impact the terms of the policy and it is your right to exercise the increase as this is an optional benefit. This benefit offers protection against the rise in the cost of living and ensures the policy is worth what you intend over the policy term. 

Convertible Policy

This is a standard termed life insurance policy that enables the client to “switch” it to a whole-of-life policy at any stage before the policy ends without the need for further underwriting or information being gathered by the client. If switched, the whole-of-life policies premium will be based on their age at the time of requesting this. Please note there is an extra premium to be paid on the plan in order to have this option.

Medical Evidence Requirements

Depending on your application disclosures or the amount of cover you require, the insurer may require further evidence to be obtained before they offer a final decision on your application.

This could be for example a GP report being obtained or a mini-medical. For larger sum assured levels, they may also require further information regarding your finances.

Writing The Policy In To Trust

We would recommend you place your policy into trust. A trust is a legal agreement that leaves your life insurance policy to be dealt with by a trusted person(s) who are referred to as “trustees”

It is the trustees’ responsibility to make sure the payout is distributed to your beneficiaries as per your wishes. An example of this would be to pass the money to your children once they hit 21 years of age.

 The benefits of writing the policy into trust include:

  • It should make it easier for your loved ones to access the insurance pay-out due to not having to go through Probate
  • The pay-out would form part of your estate so would therefore not be the subject of inheritance tax
  • Giving you the peace of mind to know your wishes will be carried out appropriately

It does not cost anything extra to write the plan into trust. We do however recommend that you get specialist advice on this matter.

How do I get Cover? – The Next Steps

Once you have confirmed the options you would like, I will assist in helping you with the following steps and get the cover confirmed as ‘in force’. The steps are as follows: 

Application

You will need to complete the insurer’s official application. I will assist in completing the application with you over the phone to ensure the questions are completed accurately and correctly.

Acceptance

The insurer will provide a decision based on the information provided from the application. The decision may be given immediately or within the space of a few working days. It is possible that the insurer may require medical evidence based on the assessment of your ‘Health & Lifestyle’ disclosures, again I will assist in supporting you with dealing with and providing any medical evidence needed. 

Confirmation

Once the policy terms have been provided, I will discuss this with you in detail. Assuming the terms are acceptable we will confirm the insurer’s offer and will need to provide payment details to set up your Direct Debit. The first payment is typically taken 10-14 days from when the cover is activated and confirmed as ‘In Force’. 

Documentation

Full documentation will be provided by the insurer directly to you. We will also send you copies of the final quote(s) you accepted, a copy of your application form and a Suitability Report shortly after your policy has been submitted. The Suitability Report contains information on why the policy is set up and it is key you read through all the information provided by both myself and the insurer to ensure the cover is suitable over the duration of the policy

Other Information

Can the quotations in this report change?

The quotations provided in this report are indicative and based on the information you provide. Any final decision will rest on a full and complete application submitted to the insurer, it is imperative you understand that any change in your ‘Health or Lifestyle’ either before or during an application may result in a change of any quotation provided. Any change in terms will be discussed with you fully before accepting an offer from the insurer. 

Can I choose my own option against your advice?

Yes, however, as an Advisor I work in the best interests of you and your circumstances. The advice given is not based on an ‘order-taking’ service and should I feel you need to reconsider your options I will discuss this with you before assisting with the application. This is to ensure you consider the risks of having the right cover suited to protecting you not only now but in the future. Ultimately the final decision rests with you and I will assist in setting up any cover you deem sufficient.