Beyond Accounting - Protection - Different Types of Cover Explained

Life assurance – different types of cover explained

Rain, rain, go away,
Come again another day.

We’ve all sung this song on one of those days when the heavens have decided to spontaneously open, completely derailing our plans in the process. You simply can’t predict what is going to happen from one day to the next – but you can prepare for it.

This is a truth that permeates all aspects of life and, here at Beyond, we build our own investment and protection plans around it. This is why life assurance is so important. If you earn an income, own a home, have a family, a business or an investment property, then protecting yourself and your family against the financial impact of ill-health, terminal illness or death is one of the most important decisions you can make.

Take a moment to think about the following:

  1. What are the costs of running a house?
  2. What allowances are needed for the likes of clothing, petrol, etc.
  3. Would there be money for life’s inconveniences, eg. washing machine repairs, car repairs, etc.
  4. What about larger expenses, eg. needing a new car, your children deciding to go to college
  5. How old are your dependents?
  6. How healthy are they?

Now, how would you answer the following question – what would happen if the unexpected happened and you weren’t able to provide for your family? Would you or your family be able to afford the above? In many cases the answer is no, and that is why life assurance exists. However, this is definitely not a one size fits all situation!

Many different types of people at different stages in their lives consider life assurance. Maybe you need a plan that covers your whole life, or perhaps you feel too young and sprightly for that and would prefer a shorter term plan in the meantime. Perhaps you are worried about a health issue causing you to take an extended leave off work, or even retire early. Luckily, there are different plans to suit different people. Take a look:

Life assurance

Let’s start with the basics – how does a life assurance policy work? A life assurance policy pays a lump sum to your estate in the event of your death, so you know that those who matter to you the most are protected. It allows you to help cover the costs involved in settling your estate, mortgage repayments, assisting with funeral expenses, paying credit card bills. There are three types:

Term life assurance

A term assurance plan protects your family financially if you die during the agreed period of the policy, by way of a guaranteed lump sum. The most common terms for this type of life assurance are 10, 15, 20, and 30 years.

Whole of life cover

A life assurance plan which lasts for a whole lifetime, and is not limited to a specific term. The lump sum payment can provide tax-efficient inheritance planning cover for your family.

Mortgage protection life cover

A life assurance plan ensuring the mortgage will be paid off if you die. This benefit decreases over the term of the contract, in line with the outstanding capital owed on a mortgage.

Temporary leave/early retirement protection

Income protection – also referred to as income continuance, salary protection or permanent health insurance (not the same as private health insurance) protects your income if you are in paid work or self-employed.

Serious illness cover

Serious Illness cover pays out a tax free lump sum, should you suffer a serious illness. Major conditions covered include malignant cancers, heart attack, stroke, and MS. The benefit can be vital, as extra cash is often needed to pay for medical bills, travel to and from hospital, pay for extra childcare, alterations to your home, etc.

Income protection

Income protection provides you with a regular income. It is designed to replace a portion of your earned income if you can no longer earn an income yourself, after an independent medical examination has confirmed you are unfit to return to work. Payments commence once you have been off work for a certain length of time – known as a deferred period. The payment continues until you have recovered and are fit to return to work, or until your chosen retirement age.

There is always the temptation to put off planning for the future – after all, we live in a country where tourists always seem to be more prepared for the weather than we are! But when it comes to the truly important things in life – such as your health, home, family and business assets – it is worth taking the time to plan ahead.

You don’t have to tackle an uncertain future alone. Beyond’s qualified experts will give you confidential and impartial advice on all aspects of your pensions, protection and investments. To arrange a free consultation, call us on 01 639 2963 or get in touch via our contact form.

Rory