Income Protection Insurance
Income protection insures you for the value of your income should you become ill or injured and no longer be able to work.
This usually provides a monthly payment roughly equivalent to your usual salary until you can return to work, or until you reach retirement age.
Critical Illness Cover
Critical illness works similarly, although covers you for serious illnesses and long-term conditions. It usually pays out in one lump sum, rather than in smaller monthly payments for a longer period.
It is important to check exactly what conditions are included within your policy, and to fully disclose any pre-existing medical conditions to ensure that your cover is valid should you ever need to make a claim.
Life Insurance
Life insurance also protects your beneficiaries should anything happen to you, and usually pays out a lump sum to your named recipients in the event of your death.
Term life insurance lasts for a fixed period, usually until your mortgage is paid off or until your children reach a certain age.
Whole life insurance exists for the entirety of your life and does not have an expiration date.
Term policies carry smaller premiums, since they will expire at a fixed point, and can be purchased on a decreasing basis to continually provide cover for the remaining balance of your mortgage, as it is paid off over time. This also means that your premiums will decrease accordingly.
Whilst life insurance is more expensive since it does not expire, it does provide the reassurance of a guaranteed pay out to your family should you die.
Who Needs Mortgage Protection Insurance?
Whilst mortgage protection insurance is not mandatory, it does mean that you have a contingency plan should anything happen and you find yourself unable to keep up with your mortgage payments.
Whether this is right for you depends on the value of your mortgage, the amount of equity you have in your home, and whether you have any other financial resources you would be able to call upon should you become injured or unwell, and no longer be able to work.
