What Are the Different Protection Policies Available to Me?

Life is full of uncertainties, and while we can’t predict the future, we can plan for it. Protection policies provide financial security for you and your loved ones in challenging times. Let’s explore some of the key types of protection policies and how they might fit your needs.

Life Cover: Supporting Loved Ones After You’re Gone

Life cover is designed to pay out a lump sum or regular payments to your family if you pass away. While it can’t ease the emotional burden, it can help alleviate financial worries, ensuring your loved ones can maintain their quality of life.

For example, life cover can:

• Clear a debt: Pay off significant debts like a mortgage, so your family can remain in the home you’ve built together.
• Provide a financial cushion: Offer your loved ones a lump sum to help cover day-to-day expenses or future needs.

This type of protection is particularly valuable if you have dependents or financial commitments that would be difficult to manage without your income.

Critical Illness Cover: Support During Life-Changing Events

Critical illness cover provides a lump sum if you’re diagnosed with a specified condition, offering financial breathing room during a difficult time.

Some of the common uses include:

• Paying off a mortgage or loan.
• Adapting your home to meet new physical needs.
• Funding personal goals or experiences you may not want to delay.

Statistics highlight the importance of this cover:

• 1 in 2 people will be diagnosed with cancer in their lifetime.¹
• Around 100,000 people suffer strokes annually.²

It might be surprising to hear that the average age of critical illness claimants is 49³ – a stage of life often marked by mortgages, children’s education costs, and other substantial responsibilities.

Income Protection: Security Against the Unexpected

Income protection ensures you still have a regular income if illness (including any potential mental health issues), injury, or disability prevents you from working. Unlike life or critical illness cover, income protection focuses on maintaining your financial stability while you recover or adjust.

Key features:

• Covers a portion of your income until you return to work, retire, or the policy ends.
• Provides short-term or long-term protection depending on the policy.
• Allows multiple claims while the policy is active.

It’s worth noting that this policy does not cover redundancies but is invaluable for managing ongoing living costs during periods of health-related work interruptions.

Asking the Right Questions

Choosing the right protection policy starts with understanding your unique needs. Here are four essential questions to guide you:

1. Why do I want it?
   Are you looking to protect loved ones, secure a lifestyle, or cover potential health-related costs?
2. What do I need it for?
   Is it for mortgage repayment, income replacement, or a financial cushion for emergencies?
3. Is it just me I need to protect?
   Do you have a partner, children, or other dependents who would face financial challenges without you?
4. How much do I want to spend?
   Determine a budget that aligns with your financial situation and priorities.

Protection policies are not one-size-fits-all. Whether it’s life cover, critical illness cover, or income protection, each type offers specific benefits tailored to different circumstances. Taking the time to reflect on your needs and priorities can help you make an informed choice that provides peace of mind for the future.

¹ Lifetime risk of cancer, Cancer Research UK, Accessed December 2024 

² NHS England, NHS launches major new stroke campaign as thousands delay calling 999 by nearly 90 minutes, 4 November 2024 

³Legal & General Claims Statistics 2022 

By Steven James

Financial Adviser

HJP Chartered Financial Planners

To find out more about Steven, click here.

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