How to determine the right type of protection insurance for you

by Liz Seyi Digital marketing manager

Protection insurance is a category of cover that seems to have attracted greater interest from many people in recent years - and we can hardly blame them. But not all protection insurance policies are the same in terms of how much coverage they provide, or even what they protect.

So, we thought we’d take you on a whistle-stop tour of the kinds of protection insurance out there, so that you can begin to properly consider your options - including which one may best suit your own circumstances and requirements.

What forms of protection cover are available?

Most people can understand the concept of a protection insurance policy as a product that is triggered by a particular event to pay out a certain sum of money. However, there is a difference between the kind of protection cover that pays out to your dependants if you die, and the kind that pays you a sum if something happens to you that satisfies the policy’s terms for a pay-out.

Life insurance, for instance, belongs to the first of those categories. Contrary to what its name might imply to some people - and we’re sure there are some wags out there who would suggest renaming it ‘death insurance’ - it is a product that pays out a one-off tax-free lump sum in the event of your death. Of course, you wouldn’t be around to benefit, so your dependants would receive the money.

Moving on to the second category we mentioned above, there are - broadly speaking - two types of cover to be aware of here: income protection insurance and critical illness cover.

It’s easy to get these two confused, so let’s put it simply: if you’re looking for a product that would effectively cover some of your income in the event of a long-term sickness or disability rendering you unable to work, in the form of monthly tax-free payments, it is income protection cover that you will be interested in.

Critical illness cover, by contrast, doesn’t pay out recurring, monthly sums. Instead, as a holder of this policy, you would be a paid a single one-off tax-free amount in the event of you suffering from one of the specific medical conditions or injuries listed in the policy’s terms and conditions. The likes of heart attacks, strokes and certain types of cancer are good examples of such conditions.

What other factors will help narrow down my options?

To decide which specific protection insurance policy - not just the type of protection insurance - would be right for you, it will be necessary to account for various factors.

One of those factors will be the question of exactly what you want to protect. If you are a parent with one or more dependants, for instance, a life insurance policy might make a lot of sense. Life insurance wouldn’t be a suitable option for someone who doesn’t have any dependants, though, given that the policy would only pay out after the policyholder’s passing.

If, then, you don’t have dependants, you might be more interested in an income protection insurance policy, given that this could help you cover your living costs in the event of injury or illness preventing you from earning your usual salary.

But of course, you will also have to consider your exact needs alongside the likely costs of a suitable policy. You might not be able to obtain an affordable policy that covers everything you would ideally like to have covered, in which case, you may need to be ruthless in prioritising certain areas of coverage.

In this situation, it’s worth asking yourself whether you might already have elements of protection elsewhere, such as an employee benefits package that includes some form of life insurance. Also bear in mind that even just some protection might be better than none.

Would you like to be put in touch with an adviser who could help you to be more certain about your options when it comes to protection insurance, including by providing a free quotationservice with no obligation to purchase? If so, you are very welcome to give us a call today, on 0800 316 6917.