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Written on 29 March 2018 by
Life insurance or life cover is a precaution you can take to financially protect your family in the event of your death. It is a tax free lump sum that is paid out to your dependants if you die at any time throughout the length of your policy. You are not required to take out life insurance to get a mortgage, but it is highly recommended in order to protect your loved ones’ standard of living when you are no longer around.
Buying a home is arguably one of the biggest financial commitments a person can make in their lifetime, and that is why home owners often arrange a life insurance policy after they take out a mortgage on a property. Knowing that your family will receive a pay-out on your death gives you the peace of mind that the mortgage will not be a worry when one of the main sources of household income is lost. However the benefits of protection do not end there, and life insurance policies can offer a host of additional benefits that you may not currently be aware of.
The death of the family’s main breadwinner is not the only way that your household’s income could potentially be compromised. If you were to be diagnosed with a critical illness, such as cancer, your ill health could result in regular doctor’s appointments or hospital stays, or could leave you too weak to travel to or carry out your work. This change in circumstance could force you to work less or maybe even stop working altogether, both resulting in a significant decrease in your family’s monthly income. Critical illness insurance is another layer of cover that can be added to your life insurance policy to provide you with a tax free lump sum to support your family if you are diagnosed with one of a list of common defined critical illnesses. This lump sum is often used to pay off or maintain mortgage repayments, but can be used by the family however they see fit.
The main breadwinner of the household is not the only person that you should be covering with your critical illness and life insurance. People sometimes forget about the potential knock-on financial effects if the partner of the breadwinner were to fall critically ill or pass away. The stay at home parents or secondary breadwinners are usually the members of your household that predominantly care for any children and dependents. If they are left unable to do this then it is likely your family will face additional childcare expenses whilst the healthy parent goes out to work.
In some cases the main breadwinner may be forced to quit their job altogether in order to stay at home and care for their partner, completely halting any source of income. In this case- if only the main breadwinner is covered for critical illness- the insurance money would not be paid out to your family as the covered family member is not suffering from ill health themselves.
It is also important that you don’t forget to cover your children when arranging critical illness cover. If your child becomes seriously ill then it is likely that both parents will want to take leave to accompany them on doctors’ appointments and hospital visits. This time off work can quickly add up and greatly reduce the monthly income of your household.
You may also want to use the cover you claim to fund more expensive treatment options that may otherwise require you to remortgage your home to cover the costs. Child critical illness cover can often be added to your policy free of charge, so is an excellent additional precaution to be aware of when arranging your life and critical illness insurance.
You may be unaware that the lump sum pay-out is not the only way that insurance companies can support their insured clients. Many companies can also offer a host of additional support to you and your family if your or their health begins to deteriorate.
Best Doctors® is an example of this offered by many insurance companies. It is an independent service to get a second opinion or additional advice from a top medical expert if you are diagnosed with a serious medical condition. This service is included in many protection policies at no additional cost, and is especially useful if you are suffering from a complex or rare illness with limited access to the relevant experts.
Access to private medical care is not the only service available from insurance companies to facilitate customer access to top medical professionals. Remote GP access is another free service offered by some insurers which allows insured customers to book an online appointment with a practising UK doctor using a mobile phone app.
The app gives you quick and easy access to a network of 5000 doctors without the need to travel to a surgery to meet with a doctor in person. The service is extremely fast and you can often be connected to a doctor within two hours. The doctor is able to provide a diagnosis and even write you a prescription without you ever leaving your living room.
You may even be able to use your personal protection policy to pay for ongoing support and alternative therapies once you have been diagnosed with one of the insurer’s defined critical illnesses. This can include treatments from deep tissue massages to cognitive therapy and bereavement counselling.
Many people are unaware that their insurance companies are willing to organise and finance these treatments, which can often be expensive with long waiting lists if you go through your doctor and organise them yourself.
Possibly the least known about practice to ensure that your family receive the maximum possible funds after your death is to consider signing trust documents when you arrange your life insurance. Writing your life insurance in trust could help to alleviate possible tax liabilities that your family could face if the cover is above a specified threshold limit. It is however important to take appropriate advice before placing a policy in trust.
The take home message here is that your life insurance policy could offer you and your family a lot more than you currently know about. It is always worth checking the additional cover and services offered to you by your insurer to make sure you aren’t unknowingly leaving gaps in your cover or paying for a service that you could be receiving for free. For more information and advice on protection cover for you and your family feel free to talk to one of our experts on 0344 346 3672 or submit an enquiry form here.
The blog postings on this site solely reflect the personal views of the authors and do not necessarily represent the views, positions, strategies or opinions of John Charcol. All comments are made in good faith, and John Charcol will not accept liability for them.