A comprehensive guide to family protection insurance: ensuring financial security

08/09/2023

In the event of the main breadwinner falling ill or dying prematurely, most families would be forced to cut their living expenses in order to survive financially.

Many individuals have begun to take out family protection insurance to act as a financial safety net in the event of the unthinkable. 

What is family protection insurance?

The term ‘family protection insurance’ refers to an arrangement that provides a guarantee of compensation for specified loss, illness or death in return for payment of a specified premium.

When a family member passes away or becomes unfit for work, family protection insurance is set up to provide the dependents with a lump sum or a recurring income to make up for the financial loss. 

The insurance can cover living expenses, healthcare, education, funeral costs, debt payments and other bills that may arise due to their sudden absence.

What are the different types of family protection plans?

The three main types of family protection insurance plans are critical illness cover, life insurance, and income protection. 

• Life insurance

Life insurance is a product that would pay out in the event of an early death or diagnosis of a terminal illness. This cover ensures that the insured’s dependents will be financially provided for in the event of their passing. 

This type of family protection insurance is essential for anyone whose dependents would lose a significant amount of income if they were to pass away. 

The amount of money paid out depends on the level of cover the insured buys. The insured is given the option to decide how the insurance will be paid out in the event of their death, whether it be used for a specific payment or left with their family for inheritance. 

• Critical illness cover

This type of family protection insurance supports an individual financially in the event of a critical illness diagnosis.

This is usually presented as a tax-free, one-off payment that would help pay for their treatment, mortgage, rent, utility bills or even changes in their home such as wheelchair access.

If an individual is unable to work due to a serious illness, it would be automatically assumed an employer would continue to provide them with some kind of income. However, in reality, most employees are moved onto Statutory Sick Pay within six months of diagnosis, which would not be enough to replace their income if they were no longer able to work.

If an individual and their family rely heavily on the main breadwinner’s income, or they don’t have enough resources to cover their expenses, critical illness cover would be the best way to support their living needs.

An individual can choose when purchasing the policy how long they would like it to run, whether that be until their mortgage is paid off or until their children are no longer financially dependent on them.

Most plans not only provide critical illness cover for cancer, heart attacks and strokes but also provide financial assistance should the policyholder be diagnosed with a less severe illness, such as an early form of cancer. It’s important to note however that illnesses covered by a critical illness plan will be completely dependent on the individual policy.

• Income protection

Income protection can be taken out if financial cover is needed for a sickness absence that is not covered by a critical illness plan.

When a person is unable to work due to an accident or illness, this type of family protection insurance provides an individual with a monthly income during their absence. 

It’s a long-term insurance plan that, depending on how serious your illness or accident is, ensures you have a consistent income until you retire or can start working again. 

This normally provides between 50% and 65% of your salary, though it may vary depending on the policy that is made available to a particular individual. 

How B-Advised can help

If you’re considering taking out family protection insurance, B-advised is here to help.

It’s crucial to have the expertise of seasoned financial advisers who are familiar with the industry when it comes to matters as crucial as important as protecting your finances.

Here at B-Advised, we have extensive experience in the financial sector and can help you identify the best offers for your unique situation in addition to providing you with quality financial advice. 

Our team is on hand to assist you in choosing the best insurance plan for you and your family. Contact us today.