The quick read:
Household financial preparedness has been tested over the past year as jobs and incomes have been cut amid the COVID-19 outbreak. And the pandemic has highlighted that – in many cases – safety nets have been found wanting.
Few families have been able to fall back on the financial products designed to protect them in the event of a death, illness or an accident. Because while most households have some form of insurance in place – for their homes, cars, pets and holidays – many still don’t insure against the loss of the most important things of all: lives and incomes.
There are several forms of insurance that do just that, however. They include critical-illness cover, which pays out a lump sum on diagnosis of one of the serious conditions included in the policy; life insurance, which pays the dependants either a lump sum or regular payments when the policyholder dies; and income-protection insurance.
This final one can be especially useful, as it’s designed to cover essential outgoings such as mortgage repayments, rent and household bills if you’re unable to work because of illness or an accident.
Women, in particular, face being financially exposed should the worst happen. While they’re increasingly likely to take responsibility for household finances1, seven in 10 have no life cover in place, 86% don’t have critical-illness cover and 91% are without income protection2.
The problem is exacerbated by the lower savings levels among women compared to men3, points out Melloney Underhill, Marketing Insights Manager at St. James's Place Wealth Management.
“Women are more likely to save small amounts regularly into low-return products. But how long will that money last if something happens that affects their ability to work? Too many are leaving themselves open to a real and present risk.”
Beyond the support and peace of mind that they can provide, many protection-insurance contracts also include a range of extra benefits that can make a real practical and emotional difference.
One of the more striking examples is the Best Doctor service, which enables policyholders to seek a second opinion on a health issue from a specialist in the relevant field.
Chelsea Collins, Third Party Protection Relationship Adviser at St. James's Place Wealth Management, recalls the difference this made to a female client who suffered a heart attack on the London Underground.
After undergoing an operation, she used the Best Doctor service in her policy to get a fresh perspective.
“It was then discovered she had a very rare heart condition,” Collins reveals. “She has since had successful surgery with a specialist who had been flown in from the US for her.”
Many insurance providers offer child-focused support too, including for parents whose kids have been diagnosed with conditions such as ADHD or autism.
Other value-added services include access to physiotherapy and money off devices such as Fitbits and Apple Watches. Insurer Vitality operates a system where policyholders can accumulate health-related points by tracking their activity through devices linked to its app. The more points collected, and the closer they get to Platinum Status, the bigger the premium discount they receive.
Other widely available services include access to counselling (online, by phone or – coronavirus restrictions allowing – face to face), employment advice and legal advice.
“Most, if not all, providers now have added benefits that cover mental wellbeing,” says Collins. “Insurers are much more clued-up on this than they used to be.”
Remember that insurers can stop paying out once you get new income and/or employment, so it’s in their interest to help you start earning again.
That also helps explain why many policies offer flexible options such as a monthly benefit to bridge the gap in earnings should you opt to return to part-time employment rather than full-time, or to a lower-income, lower-stress role.
The prospect of such valuable benefits adds to the many reasons to seek professional financial advice, as many of those extras will not be found in the policy small print, and are often available only if you buy through an adviser.
“Talk to your adviser about your concerns and what you’d like to cover,” Collins suggests. “They will help you find the policies that are most suitable and identify the benefits that matter the most to you.”
1Royal London, The division of financial labour in the home, February 2020
2Zurich, Are women underinsuring themselves?, 2017 (total sample size: 2,039 adults)
3VoucherCodes Consumer Study, October 2020