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When you have made financial investments in property, protection insurance is an important way to keep your money safe. Protection insurance is essentially a kind of safety net for you and your family should anything go wrong.
What is Protection Insurance?
Protection is a term that describes various insurance products that look after you and your family if the unexpected happens.
Protection insurance can include life insurance, critical illness cover and income protection.
The products you choose will be influenced by your personal situation, your income and the size and type of mortgage(s) you have. The team at Richard Crow Financial will provide professional recommendations about how best to protect your finances and family.
What are the different options for protection insurance cover?
Life insurance is designed to pay a tax free lump sum to your beneficiaries in the event of your death. Your family can spend this sum how they wish, but usually the priority is to pay off the mortgage. You can select different types of cover to meet your needs.
For example, many people choose a ‘decreasing term’ product. Here, the lump sum reduces in value over time in line with your mortgage debt. This tends to be cheaper than a ‘level term’ policy where the payout doesn’t change.
Critical illness insurance works in a similar way, paying out a lump sum if you were to be diagnosed with certain illnesses. These conditions are stated on the policy and usually include heart disease, cancer, stroke, brain tumour, Multiple Sclerosis and Parkinson’s Disease. The cover provides extra financial support as you undergo medical treatment, particularly as you may need to stop working.
Income protection insurance is a little different. This pays you a monthly amount if you become ill or injured. This is particularly relevant to people who are self-employed or who would not be able to manage on sick pay.
This is a very flexible form of protection cover. You can decide the period of time that you would receive the funds and the level of monthly income to suit you.
How much does protection insurance cost?
The cost of protection insurance varies greatly depending on many factors.
- Which products you decide to buy
- How much you wish to receive if you need to claim
- Whether you want the products/payments for a set time or for life
- Whether you have any pre-existing medical conditions
- Your age
Your financial adviser will help you decide on the right blend of products for your specific situation that meets your budget.
How much will protection insurance pay out?
The amount you will receive from your insurance policy varies depending on how you set the product up. Some people choose to simply cover their mortgage, while others spend more on their monthly payments so that the payout is larger.
Generally, choosing protection insurance is about balancing the cost of your monthly premiums while maximising the benefit from a claim. As brokers, we will help you make sure you get value for money.
With income protection, you usually agree to a waiting period on the policy called the deferred period. This sets out how long you wait before the payments begin. This time period can range from a few weeks to a few months, in line with any sick pay you might receive or savings you can fall back on. Shorter deferred periods usually mean a more expensive policy.
Another factor in balancing the costs is to decide how long an income protection policy will pay out for. You might decide on a limit of 12 months, hoping that you will return to work before this. Alternatively you can choose a long-term or even unlimited policy.
How can Richard Crow Mortgages and Insurance help with protection insurance?
Our mortgage brokers are qualified financial services advisers, who will help you explore protection insurance to match for your specific situation. We may recommend a combination of products to give you a good breadth of cover. We’ll compare quotes from a number of providers so that you have a good understanding of the cost.
We will work with you to set a protection budget with you that is manageable alongside your monthly outgoings. We’re here to give you peace of mind that you’re well prepared for life’s unpredictable twists and turns.