Women dice with family futures by ignoring cover

Failing to take out adequate protection against serious illness or death could have consequences for your loved ones, finds Chiara Cavaglieri
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The Independent Online

Traditional family roles may be slowly disappearing, but when it comes to insurance, many women are stuck in the 1950s. More women than ever are contributing substantially to their families' incomes and a predicted one in four women will be the main breadwinner by 2030. But many still have an old-fashioned attitude when it comes to their insurance. Half of women in the UK have no life insurance, critical illness cover or income protection in place and a quarter of them rely on their partner's insurance policies instead, according to a survey by AXA.

"There is a definite trend for many families to insure only the man on the basis that he is usually the only or the main earner. This is frequently a short-sighted move because the question that has to be asked is, what if?" says Alan Lakey, a partner at independent financial advisers (IFA) Highclere Financial Services.

Without adequate insurance, some families could find themselves perilously underprotected financially should the worst happen. One of the biggest potential health threats is breast cancer, which is diagnosed in one out of nine women during their lifetimes. Despite this, almost a third of women questioned by AXA said they believe they would have to sell their home, borrow money, or seek help from family and friends if they were faced with serious health and financial issues. With the right cover, however, many of these concerns could be eased.

Life insurance is designed to help those with dependents and partners who rely on their income to keep their household finances intact. Life insurance can be a cheap way for women to protect their families. A healthy, non-smoking, 35-year-old woman, for example, could take out a 25-year policy for £100,000 of life cover from as little as £7.14 per month with Aviva, according to insurance adviser Lifesearch.

"Life cover for women is so inexpensive that it really is criminal not to have some to provide a lump sum for a bereaved partner or guardians bringing up children," says Rosemary Heaversedge at IFA Shropshire Independent Financial Services.

Picking the right type of policy is important. The most common form of life cover is term assurance, which pays out if the policyholder passes away within a set period of time. The amount paid out, however, can remain level, increase or decrease over time. The policy should be written into a trust to curtail tax liability.

Premiums are determined by age, pre-existing medical conditions and lifestyle, so those with weight problems and smokers will have to pay more. The key to cutting costs is always to shop around and be wary of buying from mortgage lenders and even supermarkets as these are usually tied to just one provider.

There is also the option to have the cover paid as an income, with family income benefit. It is one of the cheapest means of protection because instead of paying a lump sum, this provides a monthly, tax-free income from the time of the claim for the duration of the plan term. So, if the plan term was 20 years, a claim made after 15 years would result in benefits being paid for the remaining five years.

While life cover is typically inexpensive for women, illness protection is costlier because there is a higher likelihood of claims, yet it can still be a vital form of protection. A healthy, non-smoking, 35-year-old woman could take out a 25-year policy for £100,000 of critical illness cover from £37.48 per month with Axa or income protection from £29.10 per month with insurer Unum for cover of £1,200 per month with a six-month deferred period, according to Lifesearch.

Statistically, women live longer but are more likely to fall seriously ill, so some form of income-producing plan is worth considering. "Relying on state handouts is desperately inadequate and this form of insurance will see that you and your family will be protected," says Matt Morris from Lifesearch.

With critical illness cover, a tax-free sum is paid out upon diagnosis of life-threatening conditions, which are specified in the policy. Cover can either remain level throughout the term, or decrease over time, commonly to reflect a reducing mortgage.

Income protection insurance is a common alternative to critical illness cover and pays out for an inability to work, rather than a specific illness, until the policyholder has either recovered or retired. A deferment period is set beforehand to determine how long after falling ill the policy would start providing a monthly income. Generally, those who opt for a longer deferment period can lower their premiums. Policies will have specific definitions of an inability to work: some cover those unable to do their own job, while others cover an inability to do their own job and any similar job.

When it comes to deciding on a level of cover, the amount needed varies from person to person. Experts say that individuals should take the time to find out exactly what is provided from their employment. Then calculate their current expenditure and take out cover to meet the shortfall.

"If everyone had an unlimited budget, they should protect their income, mortgage and their surviving family, but we live in the real world and people do have to prioritise. The key is to make sure you've got enough money so that you haven't got to sell the house and you give yourself some breathing space while you recover," says Dan Clayden, the director at IFA Clayden Associates.

Gender and occupation will also affect premium levels. However, some insurers will allow certain conditions to be excluded from a policy in exchange for a premium reduction. For critical illness cover, insurers Bupa, Fortis and Liverpool Victoria will allow this, however, for income protection, Fortis is the only willing insurer. Also, some policies offer free "extras" such as children's cover, which pays out if the policyholder's child gets a specified serious illness.

With both life insurance and income protection, the younger and healthier policyholders will be offered cheaper premiums so it is advisable to take a policy out sooner rather than later. Smokers should try to give up as this can dramatically reduce premiums. Also, the familiar mantra to compare prices is important with these kinds of policies.

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