Protecting you and your family
The importance of insurance cover becomes apparent when thing go wrong. With families being left without sufficient income after the death of a loved one, believing that nothing will ever go wrong is one of the biggest causes of financial difficulties.
Insurance can be extremely cost-effective and provide life-changing benefits at a low cost. The peace of mind it provides is priceless, so considering if you can afford not to have it is crucial.
Medical insurance is vital overseas as the level of state health care varies immensely. While many countries provide care for legal residents access to quality medical assistance is not guaranteed. Without adequate state support the costs of doctors and hospitals can quickly spiral, more so if a condition is serious and treatment is required. Longer waiting times and lower levels of care make cover essential as delayed treatment and limited resources are key factors in illnesses deteriorating.
With life insurance in place before moving overseas, changes may not be required to keep the policy in force. Some insurers void policies if you relocate to higher risk countries so be sure to check with your provider before leaving and be sure to update your details once you have arrived.
Corporate life insurance is often considered a replacement for personal cover. If your policy ends unexpectedly due to changes in your employment, you and your family could be exposed to risks. Costs rise with age so having to apply for a personal policy later in life can be expensive, so contracting a policy early can benefit you in the longer term.
Level Term Assurance (LTA)
LTA lasts for a contracted term determined by the customer and pays a cash sum to beneficiaries on death, in the hope they can continue living comfortably.
The amount purchased should account for debts and future liabilities, such as mortgages, school and university fees. Once liabilities have been accounted for, further cover can create capital for investment purposes and income for the loved ones left behind.
Term insurance is generally cheaper than 'whole of life' cover (see below). Contracted terms often end when mortgages are paid, children have left home and living costs reduce with the need for insurance.
Premiums are fixed so you know exactly what you get for what cost. There is no cash value at the end of the policy and it pays out on death only within the agreed term. Inflation also affects the purchasing power of the sum assured and should be accounted for.
Decreasing Term Assurance
Decreasing term insurance pays out on death within a defined term. It is designed to cover liabilities that reduce as they are paid off such as mortgages, with the cost remaining fixed as the level of cover falls. Again, there is no investment element or cash value at the end of the term and no guarantee that all your debts will be paid off.
Whole of Life Cover (WOL)
Whole of life cover costs more than term assurance as payouts are inevitable, regardless of when you die. The higher costs makes it less attractive but it can be a useful tool for tax planning when implemented correctly to reduce inheritance tax liabilities for loved ones.
Whole of life cover comes in many different guises, so it's important to know which is right for you to avoid unwanted surprises for the ones it is designed to benefit. Below are the options available when considering WOL insurance.
Investment Linked WOL
Whole of life insurance policies can be investment linked, affecting the benefits payable as they fluctuate with the underlying fund performance. The fund value is compared against the sum assured on review dates and if the investment element under-performs, the benefit could reduce or premiums increase, so always consider that cover may become insufficient or too costly to pay for.
Fixed Premium WOL
Whole of life insurance can be funded in one large payment or by fixed premiums until, for example, retirement age. Cover continues after payments cease making it useful for when income reduces or ends. Other plans allow contributions until death and this is where caution is needed as payments may become expensive the longer you live.
Critical Illness Insurance
Statistics reveal half of us will be diagnosed with a serious illness during our lifetime, highlighting the importance of critical illness insurance. If the family breadwinner falls ill, cannot work and income is affected the consequences can be severe. Critical illness cover can be expensive owing to the higher probability of paying out, but the benefit it provides when you need it most can be life changing.
Critical illness cover pays a lump sum on diagnosis of a qualifying condition. If you are unable to work due to illness, household bills, rent, school fees, mortgages and groceries still need to be paid for. Without cover, the financial stress can have a devastating impact on recovery.
Insurers provide lists of qualifying illnesses but they can be confusing with not all cancers covered. Heart attacks and strokes receive payouts but not conditions caused by alcohol or drug abuse.
Most critical illness plans include life cover, so benefits are paid out if you die having not made a claim or if your condition is diagnosed as terminal to allow you time to get your affairs in order.
It is difficult to get insured once a serious illness or health issue has been identified, so delays in arranging cover could prevent the possibility of getting covered altogether. Once in place, it's there until you cease payments or it fulfils its purpose.
Income Protection Insurance
Income protection cover replaces your salary during times of unemployment, but pays an income as opposed to a lump sum. Also covering accidents and illnesses, it can support lifestyles until such time you return to work, reach age 65 or on death, whichever comes sooner.
Can I get insured?
Life insurance can be purchased over the phone or online in the UK. Answering health and lifestyle questions and without the need to attend a medical, you'll be asked if you smoke or have done recently, how much alcohol you drink and if you regularly take part in high-risk activities for work or pleasure.
Overseas providers usually require a medical conducted at an affiliate clinic, or a clinic of your choice with a list of the medical tests required. The cost of medicals is paid for directly by the insurance company, or paid for by the customer and then reimbursed.
Once results are received, insurers decide if applications are accepted on standard terms. If the results show abnormalities it may lead to cover being declined or 'rated', ie. paying higher premiums.
Flexible & high risk locations
Finding life insurance can be difficult for high-risk locations and those working in unpredictable environments. This can often deter pursuing cover but it can be overcome with insurance specifically for high-risk professions and transient workers.
Insurance costs vary with age and health. The consequences of not being protected can be catastrophic, yet the peace of mind it gives you is beyond compare. Insurance can be surprisingly inexpensive but whatever the cost, it is effective and it's essential.