3 little-known benefits your protection policies could offer

In recent years, you may have felt more anxiety than usual about your health and wellbeing.

After all, the Covid-19 pandemic created a public health crisis that might have made you think more carefully about your family’s health. In response, you might have worked with us to put together a protection package that could shield your wealth and wellbeing in a crisis, or taken out cover of your own accord.

As you may already know, protection can make all the difference if the unthinkable happens. Insurance payouts in a time of crisis can:

• Help your family continue their lifestyle in the event of your death
• Prevent you from using up your savings if you have to stop work due to illness or injury
• Enable you or your family to pay your mortgage or other debts in a time of grief
• Provide opportunities for the next generation.

In addition to these well-known benefits your protection can offer, there are often-overlooked perks that your policies might provide.

Read on to find out three little-known benefits your protection policies might include.

1. Your critical illness insurance may cover your children, too

Critical illness insurance provides a valuable tax-free lump sum for serious medical diagnoses, including cancer, strokes, or severe heart attacks. Taking out this cover could provide your family with immense peace of mind if you became ill.

What you may not know, however, is that when you take out critical illness protection for yourself, many policies will include children’s critical illness cover too.

This means that if your child became seriously unwell, you could receive a tax-free lump sum payment that would enable you to focus on providing them with care, not on financial worries.

Depending on the value of your payout, you could even take a sabbatical from work in this instance, so you can concentrate on your family’s wellbeing at an emotional time.

In most cases, children are covered from when they are one month old until either their 18th or 21st birthday.

If you are unsure whether your critical illness cover provider includes this perk, we can help you review your policy documents. For any questions about your cover, contact us today.

2. A “waiver of premium” benefit could keep you insured if you become unable to pay

During the cost of living crisis, you might be acutely aware of how a job loss, illness, or death of a loved one could affect your wellbeing.

You might even be questioning whether you can afford protection; indeed, Royal London reports 11% of people are considering cancelling protection policies to free up disposable income.

If you feel worried about being unable to pay your monthly protection fees in unexpected circumstances, that’s where a waiver of premium benefit comes in. Acting as an “insurance policy for your insurance policy”, waiver of premium benefit continues to “pay” for your protection policies if you have to stop working.

For example, if you had to give up work due to a cancer diagnosis, your waiver of premium benefit might stop you from having to cancel any life cover or income protection insurance you hold.

3. A terminal illness benefit could help you access an early life insurance payout

Although it is unpleasant to think about, being diagnosed with a terminal illness could place a huge strain on your financial situation. Luckily, some life insurance policies have a little-known additional perk, known as a “terminal illness benefit”.

Usually, a life insurance claim provides your family with a tax-free payment upon your death, enabling them to: continue their lifestyle; pay for funeral costs; and generally benefit from better financial stability.

However, in the event of a terminal diagnosis, a terminal illness benefit allows you to receive your life insurance payout before you pass away. “Terminal illness” is generally defined as an illness from which you are expected to die in the next 12 months.

While it is uncomfortable to consider this situation, receiving your life cover payout early could be hugely beneficial to both you and your loved ones.

With an early payout, you could:

• Establish a trust or another fund for children and grandchildren
• Pay off any remaining debts, such as your mortgage, allowing your family to live comfortably after you’re gone
• Make funeral arrangements without financial stress
• Arrange your will to reflect the amount your beneficiaries are set to receive.

Remember: terminal illness benefit forms part of some life insurance packages, and is different to critical illness cover. If you receive an early payout in light of a terminal diagnosis, this is not in addition to, but rather instead of, a payout when you pass away.

Get in touch

For guidance on putting together a bespoke protection package, get in touch today. Your financial planner can review your family’s needs and offer expert advice on how to protect your wealth from the unexpected.

Email enquiries@prosserknowles.co.uk or click here to request a call back from one of our advisers.

Please note

Life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.

This article is no substitute for financial advice and should not be treated as such. To determine the best course of action for your individual circumstances, please contact us.