Breaking news: times are tough right now. You’re probably tired of hearing how it’s ‘only going to get tougher’ and that you’ll have some ‘tough choices to make’ over the coming months, right?
We’re not here to add to your ‘doom surfing’ – i.e., endlessly scrolling through negative news – but help you answer a question that many people are asking right now: ‘What are the alternatives to life insurance?’
And we’re certainly not blind to the fact that the cost-of-living crisis is making people scrutinise every penny they spend – and that extends to life insurance.
Should you buy life insurance cover?
Back in April, a survey of almost 1,000 UK residents, conducted by Consumer Intelligence, on behalf of Post, found that one in 10 people had cancelled an insurance product.
The crisis has taken another turn for the worst since then, with annual inflation now standing at its highest rate for over 40 years.
It’s expected that even more people will consider either cancelling their life insurance cover, seeking alternative protection or just not taking out a policy in the first place, to ensure they can pay for the energy bills.
Who are we to say what you should do? Everybody’s individual circumstances are different. But the good news is you do have options. Let’s check them out.
Firstly, let’s get the top-line definition out of the way. Income protection is a type of insurance designed to help you continue to meet your regular financial commitments if you are unable to work for an extended period of time.
It provides a monthly income, tax-free, if you are forced to stop work for health reasons. Unlike life insurance, it does not pay out on death.
Income protection is not just for people working in dangerous industries whose health might be at greater risk. It covers all events outside of your control.
Here are a few things to note about income protection:
- You’re unlikely to receive a pay-out if you’re fired or purposely injure yourself
- It covers most injuries and health conditions, so long as you are medically signed off from working
- Don’t expect all of your salary to be covered – typically payouts are 50%-70% of earnings, providing claimants with some incentive to return to work
- You can get cover being self-employed, with policies designed specifically for those who pay their own wage
- There’s usually a waiting period after you stop work for payments to kick in
- If you become unemployed whilst the policy is active, your cover will be halted
- You can make multiple claims on your policy if you find yourself in and out of work due to injury or illness
Based on those bullet points, you should be able to make a decent judgement on whether income protection insurance is right for you.
It’s also worth factoring in whether or not you have any kind of income protection through your employer. It’s a risky business to rely on savings, however, as you don’t need to be a mathematician to see how quickly they would be eaten up by a few months out of work.
In comparison to income protection insurance, critical illness cover tends to be a little cheaper. After all, you’re only protecting yourself against long-term and very serious conditions.
Just as with income protection, critical illness cover provides a tax-free lump-sum payment if you are diagnosed with a covered condition.
The money can be used to support you and your loved ones if you can’t earn a living through treatment and recovery. Life insurance, on the other hand, will only pay-out when you die, or in some cases if you receive a terminal diagnosis.
What you need to know about critical illness:
- Pre-existing and hereditary conditions are generally not covered by critical illness policies, for obvious reasons
- Most policies will cover: heart attacks, strokes, certain cancers, neurological diseases, respiratory diseases, eyesight and hearing damage as well as permanent disability.
- In most cases you can add cover for children to an existing policy for some added peace of mind
- A critical illness policy will usually only pay-out once
Fairly straightforward stuff, then, but there are a few things to consider, like how long you want the policy to run for - for example, some people choose to have cover until their mortgage has been paid off or the children have left home.
You also have the option to take out either standalone (just you), joint (you and your partner) or combined cover (as part of a life insurance policy).
Private medical insurance
Admittedly, it’s a bit of a stretch to call private medical insurance, or PMI, an alternative to life insurance.
They are fundamentally different products: PMI is designed to help you get you access to the right treatment you need, when you need it while you're alive. In contrast, life insurance provides a cash sum to your loved ones if you die during the length of the policy.
We get that you can’t help but just think about the ‘here and now’ at the moment, what with the cost-of-living crisis emptying our pockets today.
Let’s dive into what makes PMI appealing:
- There’s usually no upper age limit on taking out cover – so you can get protection when you’re most likely to need it
- You won’t need to take a medical examination, you’ll just need to complete a short medical history form
- With most private medical insurance policies, you can choose to stay in private hospitals or access NHS private patient units
- It’s designed to offer treatment alongside the service provided by the NHS
You could argue there’s never been a better time to take out PMI, with NHS waiting times higher than ever – knowing you’ll get quick treatment for an acute condition can provide some much-needed peace of mind.
And it might prove to be cheaper than you think to find cover – that applies to all three of the insurance products outlined in this blog.
Here at QuoteSearch, our cutting-edge technology compares prices and cover directly from leading providers. We don’t have any favourite suppliers – the quotes that you see are comprehensive and competitive.
So, when assessing your options in these tumultuous times, feel free to ask us to build out a policy that suits you and your budget.
To compare your free life insurance quotes from leading providers, click here.