Protection: what is it and why do I need it?

Protection is the broad term used for different types of insurance policies that you can take out, typically paid for monthly that serve a protective purpose should life throw you a curve ball or in case the worst should happen.

The need for protection is there for most people in one way or another. Even if you don’t own your home you may need to protect your belongings that are inside it. It’s important to know the types of cover available and work with your advisor to tailor protection that best fits your needs and objectives. Below are the types of protection you should consider.

Critical Illness Cover

Critical illness cover is there to ensure that you have financial support in the event of being diagnosed with a critical illness. When you are diagnosed, the illness you have would need to be covered under the policy in order to claim. Critical illness policies pay out a one off, tax free lump sum payment. This can be arranged alongside life insurance to pay off your mortgage or you can opt for a lower payment.

Life insurance

The type of cover that most people have heard of is life insurance. Life cover works to ensure that you are able to leave your home, debt free to your loved ones. It tends to pay out in the event of your death. You can take a specific life insurance linked to your mortgage that will pay out a lump sum designed to cover the balance left at the point of passing. This can help your loved ones focus on the important bits without worry of moving home or refinancing.

Income Protection

This type of cover is put in place to offer you financial support if you are unable to work due to longer term injury or illness. It will pay out a monthly benefit to replace part of your typical income which is tax free. This cover can be tailored to your needs and will pay out for an agreed term.

Mortgage Payment Protection

This type of cover is also known as Accident, Sickness and Unemployment (ASU) cover, is designed to pay your mortgage costs in the event of claim. It would typically pay for a defined period of time (12 months to 2 years) and would also have rules in place regarding when a claim can be made after the policy starting.

Buildings & Contents Insurance

This is more commonly known as ‘Home Insurance’. This cover comes in two parts, Buildings which is in place to protect the structure of the property including the roof, walls and floors. Buildings insurance is the only mandatory cover required to purchase a property with a mortgage. Contents insurance is given to protect your own belongings inside the property. This may be white goods, electricals, jewellery etc. A simple way to distinguish between what covers what is to imagine a house flipped upside down, anything that would fall is classed as contents.

I’m remortgaging, do I need to change my protection?

When moving home or remortgaging, our advisors will ask you to provide details of any existing cover you have in place. It’s a really important time to review your protection to ensure you have the correct level of protection to meet your needs and objectives.

Protection statistics

***Aviva, March 2017

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