Do you actually need life insurance?

13 Dec

Our guest is Naomi Greatorex, the MD of Heath Protection. If you have questions about this stuff, you can reach her on contactus@heathprotection.co.uk.
Pet insurance is more popular than life insurance, about twice as popular actually. I should know because I’m in that boat - my dog Toothless (who you sometimes hear on the podcast) is insured but not me although that is probably going to change.
There’s a 1 in 4 chance of suffering a critical illness before 65 years old.
Although life insurance premiums stay the same once you’ve taken out a policy (if you have guaranteed premiums) every year you wait to take out a policy means the premium goes up by 10% - 15%.
Statutory sick pay is £116.75/week for 28 weeks if you are employed (not available if self-employed).
Damo doesn’t have the clout to hit the buzzer, only T does.

This gets paid out after you die, so is a key way to protect your family if the worst happens.
When taking out a policy, you have to answer health questions, which get checked against your medical records. And sometimes you’ll also be asked to do a health check (paid for by the insurer).
98% - 99% of life insurance claims get paid out, which we found quite reassuring.
The key, like with all insurance we talk about, is to be completely honest so the insurer doesn’t have a reason to not pay out.
Re: ‘how much to get insured’, it of course depends on your circumstances but it’s fairly typical to insure enough to pay off the mortgage, and then potentially get paid more on top for some living expenses, either in a lump sum or monthly payment.
A lump sum policy is more expensive than a monthly payout.
You might want to consider wrapping life insurance in a trust (and choosing dependents) to shelter the payout from tax.

This will pay you a monthly income if you are unable to work because of sickness, disability or an accident.
Unlike critical illness (below), this is not based on a specific list of illnesses, but your ability to work.
If you’re an employee you can get cover for up to 60% of your gross income, which gets paid directly to you. It’s only 60% because the missing 40% effectively accounts for the tax you’d have paid on your gross income.
If you’re a company owner, you can get cover for up to 80% of your gross income and it’s highly tax efficient because you can pay the premiums from the company as an allowable expense (untaxed).
You can choose how long the term should be, but it’s normally up to the age you want to retire, e.g. 65 years old. This of course affects the price.
You can claim as many times as you need, e.g. you could be off sick for a few months, so you claim on the policy but then you might go back to work and find yourself ill again and unable to work - and you can claim again.

Critical illness covers you from a serious health event like being diagnosed with cancer, having a stroke etc.
This is paid as a lump sum (unlike income protection which is a monthly payout).
This is based on a set of specific illnesses whereas income protection is much broader, e.g. if you injure your back and can’t work, you could claim with income protection but not critical illness.
Once you’ve claimed, you can’t claim on the policy again.

Always be completely honest when taking out a policy. You don’t want to give a reason to the insurer to not pay out if the worst happens.
Before taking out any cover, check if you get anything through your work, like ‘death in service’, which is basically life insurance via your employer. Or you might have a sick pay policy you’re happy with instead.
You can get ‘budget income protection’, which is 50% cheaper but it only pays out for a limited time. Either 1 or 2 years depending on the time you pick when you purchase this, rather than the whole term.
If you speak to a broker, make sure they’re ‘whole of market’ i.e. can offer you all the products, not just a select few.
Be wary of any broker who says they’ll charge you a fee on top of them getting paid commission by the insurer.
If you have questions, you can email Naomi on contactus@heathprotection.co.uk.

If you purchase a product or service through Heath Protection, we’ll receive a small commission but it won’t affect the price you pay.

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