How much are you worth?


Simon Cole, Partner


We all like to believe that we have plenty of time ahead of us to set money aside for the future. Whether it’s paying for school fees, clearing a mortgage, or helping a child onto the property ladder, the prospect of future career earnings helps to put our minds at rest.


However, when it comes to protecting our dependants against the loss of future earnings how many of us are guilty of simply hoping for the best, rather than planning for the worst? Most of us carefully consider the insurance for our cars and houses each year, but how many of us pay the same level of care and attention to ourselves.


In this article, Old Mill Partner Simon Cole explains the options available and the reasons why it is important to regularly review any cover that you have.


What are the main types of cover to consider?


Life insurance, critical illness and income protection should all be carefully considered and discussed with your Old Mill financial planner.


What are the main differences between these types of cover?


Life insurance (which can often be known as ‘life assurance’ or ‘term assurance’) is probably the most well known. This cover pays out a lump sum should you die or suffer from a terminal illness. There are many different


Level term insurance


6


Decreasing term life insurance


types of policy to choose from, the main ones are detailed in the table below.


Critical illness insurance pays out a tax free lump sum upon diagnosis of a specified critical illness, such as cancer. It does not provide cover if you are unable to work. This type of cover should be discussed together with life insurance, as combining the two can be very cost effective.


Income protection provides a tax free monthly benefit if you are unable to work due to an illness or disability. It is more comprehensive than critical illness protection as it pays out on diagnosis of long term sickness (including mental health problems and stress). A pay out is made once you've been off work for a set amount of time.


What should you consider when taking out cover of this nature?


You should always consider what you are trying to achieve. Will the policy provide enough cover, will you or your family be able to access the funds quickly and are you duplicating cover that you may unwittingly already have in place?


How much cover should you have? This will obviously vary depending on your individual circumstances. An Old Mill financial planner can discuss your needs and ascertain the most suitable level of cover to have. There are many different factors to take into consideration when determining the right level of cover to have. These include the amount of outstanding debt that you have, your living costs, your earnings (particularly if you are the main bread-winner), and the age(s) of any dependants.


The sum assured is guaranteed and remains unchanged throughout the term. If you require cover that increases other options are available.


The sum assured decreases during the lifetime of the policy.


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