Any good adviser uses a consistent set of rules to make their recommendations. These are ours and we have shaped them to provide sensible levels of cover, rather than some ultimate protection package. For more detailed information please use the links at the bottom of any site page.
Life Insurance
- If it’s to cover a mortgage or debt it should last as long as that’s expected to. If it is to cover household living expenses it should run until your youngest child is 18, subject to a 5 year minimum period of cover.
- When covering family living expenses with a lump sum you need cover of four times your income plus £25,000 for each child under 18. If you have no children and a very low income then you need a flat £20,000 of cover. When covering family living expenses with an income payment you need the annual payment to be 1.5 times the lump sum payment you would have chosen divided by the number of years the policy will last. There’s no point having less than £1,000 a year or more than £250,000 a year. It is paid out monthly, tax free by the way.
- When covering a mortgage or other debt you need life insurance of their total amount. Where debt is being paid off monthly, as in a repayment mortgage, the cover should reduce likewise. Where you're only paying the interest, level cover is a must. Mortgages that are part one sort and part the other should have level cover because that avoids any chance of your cover being less than your mortgage. It doesn’t cost too much more.
- Joint life insurance is rarely the right solution for couples. No two people need exactly the same amount of cover and two single life policies cost little more and provide twice the benefit.
- Life insurance premiums should be guaranteed, so we don't quote those which aren't.
Illness and Disability Insurance
- The illness and disability cover we strongly recommend is also known as Income Protection. It can include unemployment cover as an optional extra (call us for this) and is way better value than other products often known as ASU, MPPI or PPI. Generally speaking, we loathe these, so don’t confuse our excellent income protection with other lesser products! When you claim, ours pays a tax free income until the end of the policy or until you are well enough to work again.
- The policy should last until you are aged 50, or 5 years' time if that takes you beyond 50. So you are covered if you are off work sick long term during that time. To control costs it should kick in after 3 months off work.
- While the amount of cover should be the maximum insurers generally allow, which is 1/2 of your current earnings (which is enough, because it’s paid out tax free), we suggest you cover 1/3 of your income as the number of claims on these policies makes them expensive. Do feel free to upgrade to 50% if you can afford it.
- If your income is below £10,500 we don’t recommend this cover, but we do recommend you call us to sort out what’s right for you. If you need more than £50,000 per annum of this cover then you should call us, as this site can’t quote for amounts over that.
Critical Illness Cover aka Cover Against Very Serious Illnesses
- We reckon this should be mainly used when you have debt and should always include extra life insurance as that's almost free when linked to it. To keep the cost of critical illness cover down we recommend you cover half your mortgage and debts, or £6,000 if they are smaller than twice that much. Cover should reduce alongside your debt if you are repaying it as you go. It should last 15 years or as long as your debts are due to last if that’s shorter than that, but not less than 5 years.
- If you don’t have debt and want this cover we recommend 1 times your annual earnings with a minimum of £6,000 and up to a maximum of £200,000.