Over the last couple of months, life as we know it has changed beyond recognition. In early March, we were drinking in pubs, working in offices, and dropping our children off at school in the morning. Now we’re working from our spare room, homeschooling our kids, and observing strict social distancing guidelines to avoid spreading the Covid-19 virus.
Such a pandemic throws up a lot of questions. We’re now having to consider things we haven’t thought about before – including the unthinkable. Frightening daily death tolls across the globe, and daily news stories of those who have succumbed to the virus, have caused many of us to think about our own mortality.
If you have children, a mortgage, any debts or loans, elderly parents or monthly commitments you have to make, it’s important to ensure you have the right protection in place.
However, reinsurer Swiss Re say that the protection gap — the difference between the level of cover that people in the UK currently hold and the amount of cover they would need to be fully protected — is currently more than £2 trillion.
This significant protection gap means that millions of people in the UK would be left financially vulnerable should they, or their spouse, pass away prematurely or suffer an illness or injury that would affect their ability to earn.
If you haven’t reviewed your cover recently, here are three reasons that it is a great time to think about what you might need.
1. Life insurance could be cheaper than you think
The Financial Conduct Authority’s Financial Lives study found that two-thirds (65%) of UK adults have no life insurance or other protection cover. Only around a quarter (28%) of adults have life insurance while just one in ten have critical illness cover.
Ensuring that there is a lump sum available if the worst were to happen to you can give your dependents enormous peace of mind. It means your family:
- May be able to repay your mortgage and remain in your family home
- Have a source of funds to meet regular monthly commitments
- Can repay any other loans or debts
Term assurance is one of the most popular types of life cover. Here, you take out a fixed sum assured based on your needs for a fixed term – say, £200,000 for 25 years.
If you die within the term, the policy will pay the sum assured (as long as you have met the terms and conditions of the policy, for example, keeping up premiums).
You may also be surprised how affordable life insurance is. Simple term assurance cover can start from under £10 per month depending on factors such as your age, the amount of cover you need, your medical history and the term of the policy.
2. You could need illness or income protection
In recent weeks, the UK has seen thousands of people off work for an extended period due to being diagnosed with and treated for Covid-19.
Income protection is designed to provide financial support in this situation. After an initial ‘deferred period’, this cover typically pays a monthly sum designed to provide an income so you can continue to pay your regular commitments until such a time as you are well enough to return to work.
Another question: what would you do if you were diagnosed with a serious medical condition such as cancer? Or what if you had a heart attack or a stroke?
Critical Illness cover is designed to offer financial peace of mind in just this sort of situation. If you’re diagnosed with a specified medical condition, the insurer will pay a lump sum which you can use to:
- Maintain your monthly commitments
- Repay your mortgage or other debts
- Pay for private or specialist treatment.
One common objection to taking out cover is that ‘it never pays out’ and that insurers somehow manage to get out of paying claims. Indeed, consumer research by specialist advisers Drewberry found that the public believe that just half of all protection claims are paid.
However, this is simply not the case. According to the most recent claims figures released by the Association of British Insurers and Group Risk Development, 98.3% of all protection insurance claims were paid in 2019.
3. Insurers adapting to government guidelines to ensure you can obtain the cover you need
Life insurance, critical illness and income protection cover have rarely been more important. So, insurers are working hard to ensure that they remain open for business and that you can still get the cover you need.
During the coronavirus outbreak, insurers are still welcoming applications and can underwrite your application. So, you don’t have to wait until the pandemic is over before applying for the cover you need.
Bear in mind:
- The underwriting questions you will be asked may have slightly changed. Some insurers are now asking whether you have experienced any symptoms of coronavirus or whether you have been diagnosed with the virus
- It may take more time to process and underwrite your application. As with many businesses, insurers have been forced to transition into remote working and so there may be slight delays in service standards
- If a medical screening is required as part of your application – perhaps because of your age, existing medical history, or the amount of cover you want – a physical examination cannot currently be carried out due to ‘social distancing’. However, many insurers have introduced ‘virtual medical screening’ so they can continue to underwrite your application and get your cover in place. This may involve a video call with a nurse to answer some medical questions.
Get in touch
During this time, we’re open for business and can help you with any mortgage or protection needs that you have.
If you’d like to review your arrangements, or you have any questions regarding life, income or illness protection, please get in touch
As with all insurance policies, conditions and exclusions will apply.