Bettering your family’s situation is the typical motivator to pick up extra hours at work, work overtime or pursue an ambitious promotion. But have you considered what might happen if you can’t work for an extended period of time at all?
How will you make ends meet for you and your family without reducing your standard of living? How will you stay on top of any mortgage payments to protect your home, for example?
Whether you become seriously ill or injured, it’s difficult to plan ahead financially for the unforeseeable with the money in your own pocket – there are too many unknown variables.
Family protection cover is an effective fall-back option that can solve some of your problems for a low ongoing cost.
There are multiple types of protection plans under the umbrella of family protection, and it can be easy to muddle them up and get them confused.
We’ll take you through some of the main options that are vital to consider.
Income protection, also known as permanent health insurance, is a specific type of illness insurance that pays a regular income if you can’t work due to sickness or a disability, and lasts until you return to work or retire.
The amount of income you can claim won’t match exactly the amount you earned before you stopped working. Instead, expect to receive between half and two-thirds of your normal earnings before tax.
This is because some money will be taken off for the state benefits you can claim, while the cash you get from income protection is tax-free.
You’ll have to wait a minimum of four weeks after you fall seriously ill or become disabled before claiming, because you may not need the money straight away if you can claim sick pay from your employer.
Some employers offer income protection insurance as an employee benefit, so check your contract with your employer directly before you consider taking out income protection insurance.
Payments can start up to two years after you stop working.
Critical illness cover
Income protection shouldn’t be confused with critical illness insurance, another type of illness insurance that pays out a tax-free lump sum if you become critically ill during the policy term.
You can use the lump sum however you like, whether that’s to help cover health-related costs, monthly expenses or lost income while you recover.
Providers will offer protection for different illnesses and conditions, so you’ll have to scrutinise their policies closely to make sure certain ones are covered, especially if you have a history of a certain illness in your family.
You can expect the most serious conditions in the UK that take people out of work or leave them with disabilities – cancer, heart disease and strokes – to be covered, however.
There are also junior critical illness insurance plans to help ease your financial burdens if your child is diagnosed with a serious illness or injured in an accident.
Family protection benefit
It can be a bitter pill to swallow, but protecting your family from the unforeseeable includes considering what would happen if you were to pass away.
Family income benefit (FIB) is a type of term life insurance that will give your family regular financial support if you die or are diagnosed with a terminal illness during the policy’s term.
Typically paid out in monthly sums, the ongoing income eases the burden of paying bills and makes budgeting more manageable, although if your family’s circumstances change, they may be able to take out the money as a lump sum instead.
A FIB policy can be particularly important for single parents and full-time carers, who can ensure the person dependent on them will continue getting money even when they are no longer around.
There are many other income protection schemes available to help protect yourself and your family should the worse happen.
Don’t hesitate to contact us on 01775 718850 to discuss your options for family protection in greater detail.