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Families' futures always at risk

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15 August 2013
Arranging protection insurance to gain peace of mind from knowing that your family would have added financial support if tragedy should strike, makes such good sense. You can discuss your protection needs with an adviser, decide on the cover you require, have the premiums collected automatically and then get on with your life. Just make a note to review your cover periodically, or when circumstances change.

The Association of British Insurers (ABI) makes a good point on its website. A periodic review, say every three years, is a useful longstop and may suit some aspects of personal finance. Extra life insurance, however, is something that should not be delayed if a new financial commitment has been taken on or there has been a new addition to the family who would need providing for if anything happened to you.
 
The phrase ‘if anything happened to you’, of course alludes to the unlikely but possible event of premature death. It can also include being diagnosed with a critical illness, as this can also have a devastating effect upon family finances due to the loss of income that may result. So, life insurance does not do the whole job on its own, making it important to have suitable critical illness cover in place alongside it.
 
It can be distressing even to think about your children being left without their parents, perhaps due to an accident. Sadly, it does happen. Life protection insurance is complex, because comparing like with like is not so simple. In this competitive market it can pay to seek expert guidance before deciding on one policy in preference to another. Simply going for the cheapest cover doesn’t guarantee best value for money if, unlike a professional intermediary, you are not equipped to weigh up the costs, benefits and conditions of one policy against those of another.
 
Data published by the ABI in December 2012 showed that amounts paid out in term life and critical illness insurance claims rose significantly the previous year. Claims totalling £2.1 billion were paid to some 45,000 families and individuals under such policies. The average amount paid out, the ABI data indicated, was about £46,000. This could be a useful sum, but it is vital to consider not only immediate financial commitments, such as the mortgage, that need to be covered upon death but also the ongoing impact of the loss of a breadwinner. All the day-to-day family expenses would still need to be met and perhaps university fees in the future. An expert adviser can help identify and quantify your protection needs.
 
Key Facts
  • Extra life insurance cover should not be delayed if a commitment is being taken on
  • A critical illness can have a devastating impact due to the loss of income that may result
  • Term life and critical illness claims of £2.1 billion were paid to 45,000 families in a year