Practice the Pause Pt.5 | Prioritising
It is no secret that Covid-19 has managed to turn the world upside down and change life as we know it. In just a few short months, our economy has been completely upturned, with many drastically losing their jobs, and redundancies becoming commonplace across almost every industry. With this, a light has been shone on the importance of personal protection insurance as many, who were once in the - it would never happen to me - bracket become cautiously aware of the need to be protected in case the worse does happen. Because if 2020 has taught us anything, it is that the worse can happen.
Since the beginning of the pandemic, enquires regarding personal protection from people of all backgrounds and age groups have skyrocketed. The number of millennials buying comprehensive health insurance has increased from 32% to 55%, while the number of people taking out income protection has increased by 31% in the last 13 weeks.*
And of course these figures bore little surprise. With the majority of us continuing to work from home and make our own coffee each morning and meals each night, why would’t we look to try and continue to save the extra money and put it towards high-priortiy protection policies, such as income protection. Or cycle to work and utilise the extra travelling savings towards life assurance? Indeed, if nothing else, the past few months have offered many of us the chance to cut back on excessive spending and focus more on the necessities. And with protection certainly falling under the latter bracket, now marks the perfect opportunity to prioritise our outgoings and build a safety net.
To help, we have created a short run-down of the most common and now extremely popular avenues to explore.
Personal protection is known as the umbrella term for three main types of protection; life, income and illness.
- Life assurance: A policy designed to help your loved ones with financial cover if you die. Most policies pay out a cash sum to your chosen benefactor if you die while covered by the policy, to help ease the financial impact of your death and help with mortgage payments, bills, childcare costs etc. There are two main types; term life insurance and whole of life insurance. Term life insurance is a policy designed with a maximum term you can apply for, meaning a cash sum could be paid out if you die during the period of cover. Whole of life insurance is a policy designed to cover the whole of your life, meaning the cash sum could be paid whenever you pass away.
- Income Protection: A policy designed to replace your income lost from being unable to work due to illness or injury. This can Most commonly the maximum amount of income that is covered is approx. 70% of monthly earnings. There are two main types: short-term income protection and long-term income protection. Short-term policies are designed to provide payments to you if you are unable to work for a set period of time. Long-term policies are designed for those unable to ever return to work, in such case, payments are made until retirement or time of death
- Critical Illness Protection: A policy designed to offer you a lump sum payment if you are diagnosed with one or more pre-determined critical illnesses. This payment is made regardless if the illness means you are still able to work. The payment is tax free and once the pay-out is received the policy comes to an end.
It should also be said that with each form of protection comes added benefits and extras dependent on the level of premium you wish to pay. If Covid has taught us anything it is that things can change quickly, therefore, you never know what protection you might need and when you need it.
Click here to watch our most recent video on the need for protection from financial advisor Alex Keddie
*Source: Max Bupa Health Insurance