What is the best protection for me and my family?
We get asked this by nearly every client and unfortunately, there is no simple answer. With so many different types of protection products in the market, we thought we would put together a few notes to help you narrow down what’s best for you.
What protection do I need for my mortgage?
The only protection you need to have when you own a property is buildings insurance, which is crazy if you think about it! It’s obviously important to make sure the property is insured if something was to happen to it but to think that you don’t also have to protect yourself is mind blowing. After all, the majority of people need a mortgage and that mortgage is based on your ability to work and earn. If something was to happen to you, who is then paying for that debt?
As Mortgage Brokers it’s no surprise that most people we talk to want to protect themselves, and their family, so that the mortgage is cleared if something were to happen. Your mortgage is the biggest debt you are likely to have so it makes perfect sense to make sure this is taken care of if your ability to work and earn is compromised. However, there are many ways you can do this so the first thing you need to think about is what are your priorities? Do you want protection if you were to die? What if you were unable to work due to critical illness or injury? The mortgage is also just a small portion of your life, so it’s important to also think about protecting yourself beyond just the mortgage balance. So many questions!
What type of protection should I get and why?
Let’s briefly discuss some of the most common types of protection and scenarios around this protection.
Life Assurance – Simply, this pays out a tax-free lump sum if you were to die. It’s usually the cheapest type of cover, so the majority of people have this but sometimes, it’s not the most important thing. If you have a partner and/or a family then absolutely, you need life assurance to protect everyone if the worst was to happen. On the other hand, If you are single with no children, unless you are leaving the property to someone specific why would you need the mortgage to be cleared when you’re gone? It would be more important for this person to cover themselves if something was to stop them from earning. Which brings us onto…
Critical Illness Cover – Again, this pays out a tax-free lump sum but this time on a diagnosis of one of the critical illnesses included in the policy. Typically, these illnesses include Cancer, Heart Attack Stroke as well as a whole host of other ailments. There is a huge amount of information out there but on average, someone diagnosed with Cancer is off work for 2 years while going through treatment and rarely do employers pay you as normal for this long. Could you or your family survive for 2 years without your income? If not, it is important to consider this type of cover. It is more expensive than Life Assurance but unfortunately, that is because you are much more likely to claim on this during the term.
Income Protection – This pays out differently to the two above. This pays out an income per month, not a lump sum. This would pay out a portion of your income if you were off work for an extended period. According to LV, the three most common reasons people claim on Income Protection policies is Accidents and Fractures, Cancer and Mental Health. Many people split their budget between Critical Illness and income protection depending on what’s most important for them.
With so many options available when it comes to protection, we’d be happy to talk to see if we can help fit the pieces together. Give us a call on 01174 520 330. Our initial conversations usually last around 15 minutes.
Alternatively, you can email firstname.lastname@example.org and let us know how we can help you.
We will discuss:
- What protection is available to you
- What that will cost
- What fees can you expect
- How Lloyd Wells Mortgages work
- What documentation you will need to provide
- Next steps
Your home may be repossessed if you do not keep up repayments on your mortgage.