Insurance policies that protect the less tangible but essential parts of your life – such as income or mortgage – can provide an invaluable safety net should the worst strike, whether that’s serious illness, unemployment or even death.
Since the arrival of the Covid-19 pandemic more and more people recognise the need for safeguards against sickness and job instability, and as a result personal protection insurance has become increasingly popular. But which policy is right for you?
This is a policy that offers coverage for a set period of your choosing, whether that’s one year or several decades. If you die during this term then the policy will pay a lump sum to your dependents. The cost of premiums is linked to factors such as age, health and the length of the term, and it’s possible to set up a joint policy with a partner. There are several types of term life insurance available:
Decreasing Term Life Insurance
Your level of coverage lessens as the term of the policy progresses, reducing the payout. It’s good for covering debts such as a repayment mortgage as the balance of the latter reduces over time.
Level Term Life Insurance
The level of coverage is fixed, so the payout remains the same regardless of when you die within the term.
This is a life insurance policy that only ends when you die – unlike term life insurance which runs for a fixed period. Once you die your loved ones will receive a lump sum payout. It’s a more expensive form of life insurance, but premiums will depend on factors such as level of coverage, health, age and lifestyle. You can get joint or single policies. The main types of whole life insurance include:
Balanced Cover
Your premiums are the same throughout the policy, with a fixed cash payout when you die.
Maximum Cover
Your premiums are likely to increase with age as your insurer needs to review the risk associated with coverage.
This is a type of insurance that provides a lump sum payout if you are diagnosed with or undergo surgery for a specified critical illness (as long as you survive for a certain period afterwards – typically 10-14 days). It can help minimise the financial impact of serious illness by helping with things like the cost of treatment, household and childcare costs and a loss of income if you take time off work to recover. Children’s critical illness cover can also be included.
Policies come in fixed terms, the length of which can be based on how long you’ll have demands on your income, such as a mortgage. Like term life insurance you can opt for level cover – where there is fixed lump sum payout and fixed premiums – or decreasing cover where the value of your cover decreases each month.
This type of insurance offers financial support should you lose income because you’re unable to work due to sickness or an accident. It ensures you get regular payments to replace part of your income, until you can return to work or you retire.
A policy covers a set term, and when a claim is made there is usually a waiting (deferral) period before payments start – between four weeks to a year. The longer the deferral period you choose, the lower your monthly premiums will be.
The cost of insurance premiums is also affected by age, health and medical history, occupation, the percentage of income you want covered and the illnesses/conditions covered.
Premiums can come in the form of standard premiums, which can increase over time, or a guaranteed premium which remains fixed for the term of the policy.
Mortgage payments are one of the biggest outgoings for many people, so it’s important to put a plan in place if you lose your source of income.
Should you become unemployed or unable to work due to sickness or an accident then this type of policy will cover the cost of your mortgage payments each month. You can also find policies pay out 125% of your mortgage so you can cover other household costs too. Most policies will offer payouts for up to two years, but some offer less.
The payments are usually triggered after there’s a set period of unemployment – generally 30-60 days – after which you’ll receive a set monthly payment. You can purchase ‘back-to-day-one’ policies that cover you from the date of unemployment, although these will be more expensive. Premiums are based on age, income, job and mortgage repayments. You can find mortgage protection policies for accident and sickness, unemployment or combined. Mortgage protection policies may not cover pre-existing health conditions.
This is an insurance policy that covers liability for inheritance tax when one person makes a gift to another person during their lifetime.
Large gifts can be considered potentially exempt from IHT if the giver survives seven years after making them.
A gift inter vivos policy protects against this possibility by covering any tax bill due should you die within seven years of making the gift.
Moving abroad may affect your life insurance cover. We therefore strongly recommend that you inform your life insurance provider about your plans to move abroad to ensure continuity of cover remains in place.
Speak directly to a financial adviser about your insurance protection requirements as an expat abroad.
Please contact us on Tel: +44 207 998 0570 or email enquiries@fwm.gi
Talk to an AdviserWe are available to help you between 9am and 6pm CET.
+44 207 998 0570Give us a call and tell us how we can assist with your financial planning needs. Our Expat experts are here to help you.
Briefly describe your situation and how we can help.