Protection insurance covers you against unexpected costs. For example, if you die then life insurance can supports your family. If you suffer a serious injury or illness, critical illness insurance can cover some of your pay if you’re unable to work. Buildings and contents insurance protect your property.
How can protection insurance help?
You might not have heard of protection insurance before, or perhaps you’ve come across the term without really knowing what it means. And you wouldn’t be alone – 58% of UK adults don’t have life insurance, critical illness cover or income protection to help support them if something unexpected happens.
This is where protection insurance comes in. It covers a number of situations where you might need financial support, helping you and your family stay on track when your circumstances change.
The type of protection depends on things like your income, family, lifestyle and financial commitments. And of course. what’s right for you now might not be the same as what you need further down the line.
Perhaps you’re moving jobs, buying a new home, starting a family, downsizing or even approaching retirement. These are all good times to check out the type of protection you have and check that it still fits your needs.
It can also make sense to take another look at your protection when you’re looking at your mortgage. So, what types of protection insurance are available and what do they actually cover?
Income protection
Income protection can give you a regular income if illness or injury means you’re unable to work. It usually pays a percentage of your income, helping you cover the costs of your essential outgoings while you’re off work.
There are different types of income protection, with some policies paying out for a set period and others potentially covering you for several years.
The right cover for you will depend on things like your income, monthly outgoings and any sick pay you get through work. Read our full guide to learn more about what income protection can help you with.
Life insurance
If someone else relies on your income, life insurance could help make things a little easier for them financially if you die.
Life insurance can pay out a lump sum if you die while your policy is in place. Your loved ones could use this towards the mortgage, rent, household bills or other expenses.
You can choose how much cover you need and, depending on your policy, how long you want it to last. The right amount will depend on things like your mortgage, income and who relies on you financially.
Find out more about why you might need life insurance and how you can plan for the future.
Critical illness cover
Critical illness cover can provide a lump sum if you’re diagnosed with one of the specific conditions listed in your policy. You can use the money however you need, whether that’s helping with household bills, paying your mortgage or covering treatment costs.
If life insurance pays out when you die, critical illness insurance is there to support you if you’re diagnosed with a condition covered by the insurance. You can take life insurance and critical illness cover separately, or combine them in one policy.
A payout is usually made once, after the policy ends. The conditions covered and the level of cover can vary between insurers, so it’s important to check the details of your policy.
Buildings and contents insurance
When you hear the term ‘home insurance,’ it usually rmeans two different types of cover: buildings insurance and contents insurance.
Buildings insurance covers the structure of your home and any permanent fixtures and fittings (such as the roof, walls, fitted kitchens and bathrooms).
Contents insurance covers the belongings you keep inside your home, like furniture, electronics and personal possessions (basically anything that isn’t glued down). It can also cover things like fitted carpets, depending on the policy.
If you have a mortgage, it is a legal requirement to have buildings insurance in place. Contents insurance is optional, but it could help cover the cost of replacing your belongings if they’re damaged, lost or stolen.
Many homeowners combine the two under one policy, which can make things a little easier to manage.
Family Income Benefit
Family Income Benefit can provide your family with a regular, tax-free monthly income if you die during the policy term. The payments can help cover everyday costs like household bills, the mortgage and other living expenses.
It can be useful for families with young children, especially if one parent earns a lot more than the other. However, it’s not just for families and you don’t have to have children to consider it.
If you’re a couple, and your partner would find it difficult to manage financially without your income, Family Income Benefit could be an option to look at.
Mover protection
Buying or selling a home doesn’t always go to plan. If your sale or purchase falls through for any reason outside of your control, mover protection could help you recover some of the costs you’ve already paid.
Depending on the policy, this could include things like legal fees, survey or valuation costs, mortgage fees and searches. The costs covered and the amount you can claim will depend on the policy, so check the terms before you take it out.
It can be useful if you’re worried about losing money when a property transaction falls through, especially as you might have already paid for several services before you’re ready to complete.
Are you fully protected?
There’s no one-size-fits-all approach to protection insurance. You also don’t need every type of protection insurance and you might already have some cover through your work or existing policies.
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Frequently asked questions
Financial risk is how likely you are to experience financial setbacks due to unforeseen factors, such as death, critical illness and disability.
Financial risk can be caused by a variety of things. Some of these are in your control, like your level of spending and lack of insurance, but others are external, like health and the economy.
By taking out protection policies, you can lessen the impact of financial risks. This can be income protection, or other forms of insurance, and saving an emergency fund where possible, just in case you face any financial risks that aren’t covered by your insurance.
Financial stability means you have enough income to cover your expenses and have a buffer for emergencies (protection policies and savings). Our Financial Risk Assessment can help assess your current situation and inform you if any improvements could be made.
Events out of your control can hurt your finances. Take a free Financial Risk Assessment to help spot your vulnerabilities and look at protection options that can give you peace of mind.
The only insurance that is actually mandatory for a mortgage is buildings insurance. It’s a lender requirement and ensures that should something happen to the property you are both covered.
There are a few factors to consider when choosing insurance and protection. These include the types you need, the amount of coverage you need and the overall cost of the policies. We always recommend comparing different policies to find a deal that suits you.
The cost of protection will vary depending on the types you choose, the cover you need, your age and your health. In general, protection is often a relatively affordable way of financially protecting yourself and your family.
We recommend reviewing your protection policy at least once a year to ensure that your policies are still meeting your needs. This is especially important if your circumstances have changed, such as if you have had a child, gotten married, moved home, or changed jobs.