Simon Read: In need of protection? Don't jump in and fall for the wrong insurance cover

 

Look, I know you don't want to talk about this – I'm not all that comfortable discussing it myself – but if you have financial responsibilities then you really should think about protecting your family.

Why? Because you don't want to leave them with a money mess if a breadwinner ends up being unable to work or dies. Let's face it, if the latter happens and there are no contingency plans in place, then those left behind could end up with a financial headache, as well as heartache.

I'm not trying to scaremonger or persuade you to splash out on insurance you don't need or can't afford. All I know is that having plans in place to ensure that my family will be able to afford their current lifestyle if something happened to me gives me some comfort.

We hope that money spent on life insurance or other protection proves to be money wasted. But, you know, just in case... a few quid a month can offer some peace of mind.

Oddly enough it seems people are more likely to protect their pet than themselves. Research from NFU Mutual shows that while 37 per cent of dog and cat owners have insured their pets against accidents or illness, only 34 per cent have arranged insurance for themselves.

I understand if you put your pet's importance above yourself, but what about your family? That's what we buy protection for, to give loved ones a financial safety net.

Right. Hopefully you're still with me now we've got over the difficult bit, that of raising the issue. Onto the confusing bit, deciding what kind of protection is right. I faced the problem when I became a father 13 years ago. I wanted life cover, I just didn't know what type to get. There were – and still are – lots of different options. Confused? You bet I was.

But I'm not the only one. Research by protection specialists LifeSearch last month shows that there's still a huge amount of confusion out there, even among people who have decided to take out protection.

In fact nine out of 10 people who contacted the firm looking for cover ended up buying a different type of policy than the one they asked for.

That's because most people simply assume they should get life insurance which pays out a lump sum if they die. But there are other options which may be better, or cheaper.

Research by insurance giant Aviva suggests that one in 10 people could end up with the wrong type of protection. While only four out of 10 people read life-insurance documents properly to check the cover is correct, one in 10 doesn't even give them a cursory glance.

In short that means they could be paying out for something that is not really what they wanted. Of course, none of us looks forward to the chore of poring over some detailed, financial document. But you don't even need to do that yourself. There's plenty of advice around to help you choose the right kind of protection.

"Most people don't realise they can benefit from advice until they've received it," says Tom Baigrie of LifeSearch. "For instance, income protection is arguably the most important insurance because it replaces the one thing most need most, our incomes. Yet 10 times as many people buy life insurance, simply because it is cheaper."

Robert Morrison, chief underwriter for Aviva, says: "Unfortunately people don't always understand the different types of insurance cover.

"But it's fundamental that when people take out protection insurance – be it critical illness cover, income protection or life cover – that they understand what they are buying and that it's a policy that suits."

The company's research shows people are particularly confused about critical-illness cover. Four in 10 confuse it with income protection, incorrectly believing it will pay an income if you're too ill to work.

But you really don't need to worry about being confused over different plans. Instead the question to ask yourself is what do you want to ensure happens to your family if you die or can't work anymore. Do you want to ensure that all your debts are paid off? If so you want a policy that pays out a lump sum.

Or do you want to ensure your family doesn't face financial hardship if someone bad happens to you? In that case you'll probably want a policy that pays a regular income to replace the lost one. Once you know what you want, you simply need to ask an expert what's best.

"One of the most common questions advisers ask people is whether or not they want the cheapest option, or the best value-for-money solution," says Kevin Carr of Protection Review.

"Tips such as buying single-life plans and putting policies in trust can be a better move. However, most people don't know about these issues. An adviser can add value, without increasing the cost."

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Software Development Manager

    £40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

    Ashdown Group: Product Manager - (Product Marketing, Financial Services)

    £30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

    Recruitment Genius: Compliance Assistant

    £13000 per annum: Recruitment Genius: This Pension Specialist was established ...

    Ashdown Group: Market Research Executive

    £23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

    Day In a Page

    As in 1942, Germany must show restraint over Greece

    As in 1942, Germany must show restraint over Greece

    Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
    Britain's widening poverty gap should be causing outrage at the start of the election campaign

    The short stroll that should be our walk of shame

    Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
    Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

    Homeless Veterans appeal

    The rise of the working poor: when having a job cannot prevent poverty
    Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

    Prince Charles the saviour of the nation?

    A new book highlights concerns about how political he will be when he eventually becomes king
    How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

    How books can defeat Isis

    Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
    Judith Hackitt: The myths of elf 'n' safety

    Judith Hackitt: The myths of elf 'n' safety

    She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
    The open loathing between Barack Obama and Benjamin Netanyahu just got worse

    The open loathing between Obama and Netanyahu just got worse

    The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
    French chefs get 'le huff' as nation slips down global cuisine rankings

    French chefs get 'le huff' as nation slips down global cuisine rankings

    Fury at British best restaurants survey sees French magazine produce a rival list
    Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

    Young carers to make dance debut

    What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
    Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

    Design Council's 70th anniversary

    Four of the most intriguing prototypes from Ones to Watch
    Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

    Dame Harriet Walter interview

    The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
    Art should not be a slave to the ideas driving it

    Art should not be a slave to the ideas driving it

    Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
    Bill Granger recipes: Our chef's winter salads will make you feel energised through February

    Bill Granger's winter salads

    Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
    England vs Wales: Cool head George Ford ready to put out dragon fire

    George Ford: Cool head ready to put out dragon fire

    No 10’s calmness under pressure will be key for England in Cardiff
    Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

    Michael Calvin's Last Word

    Time for Old Firm to put aside bigotry and forge new links