Recent research by Scottish Widows indicates that we are more likely to insure our phone rather than our health.
This has led to a ‘protection gap’ shortfall- the cash shortfall that you may face if diagnosed with a serious illness. The shortfall arises due to a stoppage or reduction in income along with increased costs as a result of the illness – cost of travel and parking for hospital appointments and increase in heating bills during the winter months for example. Indeed, many assume that the state will provide for them and over estimate benefits which are usually means tested, conditional and time boxed.
Royal London, a leading insurer, found that in 2017, 3.5 million diagnosed with a critical illness faced a shortfall in their income.
We never know just what is around the corner in life so it is vital to have an appropriate plan in place to protect your finances, prevent erosion of savings and bring peace of mind that you would be financially secure at what could be an emotional and difficult time.
Critical Illness protection is an insurance that pays out a lump sum should you suffer from a serious illness or injury that is specified in your policy. It can also be taken out with life insurance and as a joint policy with your partner. It is often used to cover a mortgage loan or as a source of funds to adapt the home in the event of a disability.
Several providers have enhanced their critical illness offering recently with an expanded range of medical conditions and increased payment levels. Cover not previously available for certain conditions can now be obtained- for example, early stage low-level cancers, severe mental health, sepsis and pregnancy complications.
Another option is an Income Protection policy- this covers your earnings from the risk of sickness and injury and pays out a monthly benefit should you be unable to work. It can cover you for any illness or injury that prevents you from working. It is often used to specifically cover monthly mortgage payments or the essential monthly outgoings in periods of incapacity- including your mobile phone bill!
It is important to obtain independent advice when considering the scope and key differences between a Critical Illness Policy or an Income Protection Policy. BlackBear Financial Group can help you mitigate the risk of income shortfall and help you decide which may be the best policy for your personal circumstances.
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