‘I’m protected against death, disease and illness’. But what about YOU? | Personal Finance | Finance

The pandemic has made people realise how vulnerable we are to serious illness and death. One in four says they are more likely to buy protection insurance as a result, a study by consultancy Hymens Robertson shows. Head of product Karen Brolly said: “The turbulence of the past 18 months has led people to re-evaluate their priorities.”

Parents and people with dependents are most likely to take out insurance, but sensible singles do it as well.

Öz Deniz Varol, 29, is single with no children, but wants to feel safe. “My family live in Northern Cyprus and I’m concerned what would happen if I became seriously ill and couldn’t work.”

Öz has income protection with insurer Aviva, which would pay £600 a month if she could not work, which would continue to a maximum age of 68 if she did not recover. This costs her £7.28 a month.

Income protection pays a monthly replacement income if you cannot work due to health problems, which may include stress, back trouble and long Covid.

Don’t confuse it with the inferior and notoriously mis-sold payment protection insurance (PPI). Income protection has broader cover with fewer exclusions than PPI, and the replacement income will continue until you can return to work, or until retirement.

Öz also has £25,000 of critical illness cover to age 76, costing her £16.37 a month.

Critical illness cover pays a tax-free lump sum if you contract one of a list of serious illnesses, such as cancer, kidney disease, heart attack or stroke.

Cancer is the most common reason people claim on the policy, with insurer Zurich saying it accounted for more than four out of 10 customer payouts. Breast cancer claims made up a large proportion, with the average claimant just 32 years old.

Coronavirus is not covered but related complications like a stroke or heart attack would be.

Öz also took out £135,000 of life insurance to cover the mortgage on her Leeds home, where she lives with dog Pikachu. This will cost her another £7.53 a month.

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Although many single people do not take out life cover, this would allow her to pass on the value of her property to her family should the worst happen.

Because Öz is young and healthy, protection is relatively cheap. Her three policies cost her just over £30 a month in total. The later you leave it to take out a policy the more you will pay, particularly if you have suffered illnesses along the way.

In an ideal world, people would have total protection with life insurance, critical illness cover and income protection.

Those with dependents should seriously consider protection, so what does it cost?

At 50, a non-smoker would typically pay from £15 a month for £100,000 of term life insurance to age 68. Premiums could double for those who smoked or drank heavily, or had health problems, as a claim is more likely. If combined with critical illness, the premium would increase to around £100 a month.

A stand-alone income protection policy would cost a healthy non-smoker around £35 a month for £1,000 of monthly tax-free income to age 65, depending on their job. It would pay after three months of illness.

Insurers Aegon, Aviva, Canada Life, LV, Royal London, Vitality and Zurich all offer life cover. People typically buy through an independent financial adviser.

Ian Sawyer, commercial director at broker Assured Futures, said the pandemic has highlighted how vulnerable we all are. “Income protection for both illness and redundancy is a must because if we cannot earn we cannot pay the bills.”

Alan Lakey, director at broker Highclere Financial said your income may dry up if you fall ill but your financial commitments will continue.

Ben Burgess, senior adviser at LifeSearch, said many are reluctant to have family conversations surrounding death and illness, but the pandemic has brought our own mortality into focus. “This is a complex area so seek independent financial advice first.”

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