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Personal Insurance Guide 2018

Guide to Personal Insurance

Income Protection Insurance

Personal Income Protection Insurance

Income Protection insures your income if you are unable to work due to illness or injury, paying monthly benefits to cover your expenses.

Private Health Insurance

Personal Health Insurance

Private Health Insurance covers the cost of private medical care if you fall ill, giving you access to fast healthcare when you need it the most.

Life Insurance

Personal Life Insurance

Personal Life Insurance pays out a lump sum upon your death to cover funeral costs, clear debts or financially support your loved ones after you’re gone.

Mortgage Insurance

Personal Mortgage Insurance

Mortgage Insurance comprises Mortgage Life Insurance to protect against death and Mortgage Payment Protection to cover you in case you can’t work.

Critical Illness Insurance

Critical Illness Insurance

Critical Illness Insurance pays out a tax free lump-sum should you suffer from a critical illness. This can be used to cover medical expenses, replace lost income or make adaptations to your home following a disability.

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Types of Personal Insurance

Income Protection Insurance

Protect your earnings with Personal Income Protection Insurance.

What is Income Protection Insurance?

Income Protection Insurance is designed to protect your salary if you are unable to work. If you are injured or fall ill, Personal Income Protection Insurance pays out monthly benefits relative to your usual salary to help you cover your usual expenses.

Depending on the insurer you get your policy from, you can cover up to 65% of your gross income. Long-term cover will pay out up to the age you expect to retire.

Sam Barr-Worsfold, Independent Protection Expert at Drewberry

Some long-term Income Protection policies can keep you covered until you retire and have an unlimited claims period.

That means that you could potentially continue to claim for incapacity right up until you reach the age to retire.

Sam Barr-Worsfold
Independent Protection Expert at Drewberry

 

Do I Need Income Protection Insurance?

State benefits offer the bare minimum of financial support and many people likely would not be able to maintain their standard of living if forced to rely on them.

With Income Protection, you can receive as much as 70% of your monthly earnings if you are unable to work.

Even if you have savings put aside, very few people have enough to last them without any other source of income.

With Income Protection, however, you can receive regular income from you policy to tide you over until you are well enough to return to work.

How long could you survive without your personal income?

Taking more than 6 months off work is more common than people think it is and there is a very real chance that you can become seriously ill or injured.

According to Drewberry’s 2018 Protection Survey, 14.7% of the over-55s had needed to take at least 6 months off work at some point during their careers.

Meanwhile, 2 in 5 adults have less than £1,000 in cash savings so simply don’t have the means to support themselves for long.

Rauri Taylor, Independent Protection Expert at Drewberry

We can’t predict when misfortune will strike and very few people have the resources to support themselves and their family if they needed to take time off work.

If you want to protect your income in the case of an emergency, Income Protection Insurance is typically the most reliable personal protection insurance product that you can buy.

Rauri Taylor
Independent Protection Expert at Drewberry

Life Insurance

Personal Life Insurance is designed to provide financial support for your loved ones if you pass away.

What is Personal Life Insurance?

Life Insurance is one of the most important protection products to purchase if you have loved ones that rely on your income. A Personal Life Insurance policy pays out a lump sum to your loved ones if you pass away during the term of your policy.

If you provide care or financial support for your loved ones, then they may have difficulty coping without you.

If you don’t want your insurance policy’s payout to be given to your loved ones in the form of a lump sum, you can choose Family Income Benefit instead.

Family Income Benefit pays out an agreed sum annually to offer ongoing support for the remainder of the policy term. The policy often runs until your youngest child has finished their education and is ready to be financially independent.

There are two main types of Life Insurance: Decreasing Term Insurance and Level Term Insurance. Both last for a set term, but with Decreasing Life Cover the payout falls over time, typically in line with an outstanding mortgage. As the benefit reduces over the length of the policy, it’s the cheaper of the two options.

Level Life Insurance remains fixed throughout the policy. It’s more used to provide your family with financial stability, no matter when you die. It will leave behind exactly the same amount if you die in the first year of a 25-year policy as if you died in the 24th year.

Why Consider Life Insurance?

If you have dependants who rely on your income, then it’s important that you provide them with some kind of financial support if you die.

do i need personal life cover?

With a Life Insurance payout, your loved ones could clear away some if not all of the debts that they may struggle to pay off without the aid of your income.

Alternatively, they might use the payout to cover their daily expenses until they can secure a stable, regular income without you or they could put it towards funeral costs.

There are many ways in which a Life Insurance payout can be put to good use and many reasons why a Personal Life Insurance policy is a valuable protection product.

Rob Harvey, Independent Protection Expert at Drewberry

Writing your Life Insurance policy into trust is a way to ensure that your children receive your policy’s payout and don’t need to worry about inheritance tax biting a chunk out of their vital financial support.

When you write your Personal Life Insurance policy into trust, it also allows the benefit to bypass going through probate and reduces the amount of time it takes for your payout to get to the people who need it.

Rob Harvey
Independent Protection Expert at Drewberry

 

Personal Life Insurance with Critical Illness

With most Life Insurance policies, you will be given the opportunity to add Critical Illness Cover to your policy.

By combining Personal Life Insurance with Critical Illness Cover, you can claim for a critical illness for your Life Insurance payout.

This joint policy has a few benefits and drawbacks compared to purchasing two separate policies that you may need to consider.

One of the main benefits of purchasing Life Insurance with Critical Illness Cover is the cost. As a joint policy, it costs less to have your Life Insurance and Critical Illness Insurance on the same policy compared to purchasing two independent insurance policies.

However, there is a considerable drawback that may negate the appeal of a cheaper policy.

While you do get an increased level of cover from a Life Insurance policy with Critical Illness Cover, it will only ever pay out once. If you claim on your Critical Illness policy for a condition that incurs a 100% policy payout, the insurance terminates. This includes the life cover element.

If the critical illness you suffer is less severe and only warrants a percentage payout, the remainder will still be available to be paid out should death occur, but it will be less than the full amount you initially insured yourself for.

Most Life Insurance policies typically have a Terminal Illness benefit that allows you to claim during your lifetime if you are diagnosed with a terminal illness.

 

Do I Need Personal Life Insurance?

Life Insurance is a personal protection insurance product that is designed to benefit your loved ones. If you are the primary earner of your family or a carer, your loved ones could struggle to manage their finances without you or cover the costs of your funeral.

As tragic as it is to think about losing our loved ones, it’s important that we make sure to take care of the people that are left behind with bills to pay and expenses to cover.

Critical Illness Cover

Critical Illness Insurance will pay out if you suffer from a critical illness.

What is Critical Illness Insurance?

Critical Illness Insurance pays out a tax-free lump sum should you suffer from a serious illness or injury during the policy’s agreed term. Every insurer that provides Critical Illness Cover will have their own list of critical conditions that are covered by the policy. This can range anywhere from 10 conditions to over 100 depending on the insurer.

While Health Insurance specifically covers medical costs, Critical Illness Insurance pays out a lump sum that can be used to cover general expenses as well.

Some critical illness policies also offer ‘partial payments’ when you contract a less serious condition, leaving the remainder of cover in place. However, if your condition doesn’t meet the severity criteria, such as early stage cancer or a ‘minor’ heart attack, then you may not receive a payout at all.

Critical illness cover can also be purchased combined with Life Insurance Cover.

Why Consider Critical Illness Cover?

If you are diagnosed with a critical illness, the lump sum provided by Critical Illness Cover can be used to keep up with your expenses to protect yourself and your loved ones.

You can choose the size of your payout when you purchase Critical Illness Insurance. Often, cover is aligned with your mortgage to allow you to repay the debt if you were to fall critically ill.

Samantha Haffenden-Angear, Independent Protection Expert at Drewberry

While Critical Illness can be a valuable personal protection insurance product, a lump sum payout may not be the best way to cover day-to-day expenses if your illness prevents you from working.

Instead, Income Protection may be the better choice because you’ll be able to receive monthly payments for as long as you need rather than being given one lump sum.

Samantha Haffenden-Angear
Independent Protection Expert at Drewberry

If you’re unsure about whether Critical Illness Cover or Income Protection is the best policy for you, it’s always best to speak to a financial adviser. The team at Drewberry is available on 01273646484.

 

Do I Need Critical Illness Cover?

Critical illnesses can be life changing in many cases. If you are left paralysed by a stroke or are diagnosed with cancer, a lot of costs may be involved to organise care and treatment. The payout from a Critical Illness Insurance policy can help you cover vital expenses during a difficult time.

  • One of the most common reasons behind Critical Illness claims is heart attacks (16%). There are an estimated 915,000 heart attack survivors in the UK – British Heart Foundation.
  • Around one out of two people born after 1960 will develop cancer during their lifetime – Cancer Research UK.

Not every incidence of cancer or heart attack will be covered by Critical Illness Insurance. Minor incidences may not trigger a payout – it all depends on your policy wording.

Jake Beale, Independent protection Expert at Drewberry

One of the biggest issues with Critical Illness Insurance is that it is only as good as the amount of critical illnesses covered in the policy.  Some policies cover very few conditions while others do not cover minor cases of the critical illnesses that cover. To ensure that you get a policy with sufficient cover, speak to our financial advisers today.

Jake Beale
Independent protection Expert at Drewberry

Mortgage Protection Insurance

Personal mortgage insurance will ensure that you don't have to worry about paying your mortgage if you are having money troubles

What is Mortgage Protection Insurance?

There are two specific Personal Insurance products that make up Mortgage Protection Insurance:

This personal protection insurance product will prevent you from losing your home if you or your loved ones can't pay the mortgage.

Mortgage Life Insurance

Mortgage Life Insurance is a type of Life Insurance that will cover the cost of your mortgage debt.

With this personal insurance, your loved ones don’t have to worry about having to keep up mortgage payments if you were to pass away. With the lump sum they receive from your policy, they will be able to clear the mortgage debt right away.

You can add Critical Illness Cover to Mortgage Life Insurance so you’ll receive a payout should you be diagnosed with one of the critical illnesses at the severity set out in your policy documents.

Mortgage Payment Protection

Mortgage Payment Protection Insurance (MPPI) will protect your monthly mortgage payments. If you aren’t earning, this insurance will cover the cost of your monthly mortgage payments by paying out on a monthly basis until you are well enough to return to work or the end of the policy term.

 

Do I Need Insurance for My Mortgage?

A mortgage is potentially one of the most significant financial commitments that you will make in your lifetime and there is a lot at stake if you can’t meet your mortgage payments.

Missing mortgage payments could result in your debt’s interest increasing, costs, charges etc. being added on top of your debt, or you could find yourself losing your home altogether.

Many people in the UK are still some time away from finally paying off their mortgage. While protecting your mortgage is not an obligation, it is highly recommended that you take precautions to ensure that your home is not put in jeopardy if you ever faced misfortune.

Private Health Insurance

Get fast and high quality treatment from private specialists with Personal Health Insurance.

What is Personal Health Insurance?

Personal Health Insurance provides you with access to private healthcare facilities, physicians and treatments. It’s designed to cover the costs of private medical treatment for acute conditions.

With Personal Health Insurance, you can stay in a private room.

Private Health Insurance  gives you access to private healthcare facilities and can help you avoid NHS waiting lists, benefiting from fast-track consultations.

You can be treated in private hospitals and have access to consultants and medical professionals that you can refer to consistently rather than being bounced around to available staff.

Personal Health Insurance is designed to cover acute conditions that are treatable. It generally doesn’t cover chronic conditions, but can cover acute symptoms and your treatment leading up to the diagnosis of a chronic condition.

 

Do I Need Personal Health Insurance?

Why Consider Private Medical Insurance?

While the NHS is an indispensable service that does exceptional work, waiting lists are getting longer thanks to an ageing population and a funding squeeze. With Private Health Insurance, however, you can avoid having to wait weeks – or sometimes months – to receive treatment.

In other instances, having Health Insurance can make getting treatment a much more pleasant experience. You have more control over your appointments, the professionals who treat you, the hospitals you stay in and even when your loved ones can visit you.

Waiting around for treatment from the NHS can put your whole life on hold.

You are also allowed more privacy and comfort, with a private room for any overnight hospital stays with most facilities providing private bathrooms for patients as well.

A long waiting list for treatment from the NHS could leave people with debilitating conditions needing to take a break from work, leaving them in financial hardship if they don’t have anything to cover their wages while they wait for an operation.

If you’re self-employed, it’s easy to see how any break from work could be disastrous, especially if you’re a sole trader. Some people can wait as long as 18 weeks or more to receive some kind of treatment.

Personal Accident Insurance

Personal Accident Insurance will pay out if you are injured in an accident.

What is Personal Accident Insurance?

Personal Accident Insurance is a personal protection product that many people have heard of but not many people fully understand what it is or what it does. If you have an accident, Personal Accident Insurance will cover any injuries you receive as a result. What’s covered exactly depends on the policy.

Some will cover minor injuries that don’t necessarily prevent the insured from working, while some will need you to be signed off work with the injury to claim. Some policies cover fractures, while others do not. Certain policies will only cover you if you’re permanently unable to work; meanwhile, others will pay out for loss of earnings due to temporary incapacity.

It may sound similar to Income Protection Insurance. However, rather than providing regular benefits to support you, Personal Accident Insurance offers a one-time, lump sum benefit.

There is a lot of ambiguity about Personal Accident Insurance. You really need to get deep into the small print of the policy to figure out what you’ll be covered for and whether you’ll be able to make a claim when needed.

victoria slade can offer advice on personal protection insurance policies

Personal Accident Insurance benefits are typically capped at an amount between £5,000 and £20,000. While this might seem like a reasonable payout in theory, this more than likely won’t last you very long if you had no other source of income.

This can be made worse if you have to take several months or even several years off of work to recover from a severe injury.

Victoria Slade
Independent Protection Expert at Drewberry

 

Personal Accident Insurance vs Income Protection

In general, Income Protection is the better product compared to Personal Accident Insurance if you want to protect your income. It will support you over a much longer period than Personal Accident Insurance.

There are a few key differences between Personal Accident Insurance and Income Protection that that make Personal Accident Insurance a less appealing policy if you are looking to protect your income.

Personal Accident Insurance
Income Protection

Uses Suited/Any Occupation definition of incapacity

Own Occupation definition of incapacity is available

Covers injuries and accidents that prevent you from working

As well as covering injuries, Income Protection will also cover illnesses, including mental health conditions

Pays out a lump sum once

Pays monthly benefits of up to 65% of your income, with long-term cover allowing you to claim until you reach your retirement age if you can never work again

Ask Rob Harvey, independent protection expert at Drewberry, for advice on personal protection cover

When compared to Income Protection Insurance, the cover Personal Accident Insurance provides is in many ways inferior. Moreover, the single lump sum payment from Personal Accident Insurance – after which the policy terminates – is unlikely to be able to sustain you and your family over the long-term if this is required.

Rob Harvey
Independent Protection Expert at Drewberry

You should always review your personal protection policies after you have made any significant changes in your life.

When to Review Personal Protection Products

Products as important as personal insurance policies shouldn’t be filed away and forgotten about. Personal protection policies should be reviewed and updated when there are changes in your life. This is to ensure that the cover your policy is sufficient.

Certain life-altering events should be followed by a review of your personal insurance policy:

  • Getting married/ co-habiting
  • Starting a family
  • Moving jobs with a change in employee benefits
  • Becoming self-employed, a contractor or starting a business
  • Buying a property / getting a mortgage
  • Moving to a higher value property with a larger mortgage

Some personal protection policies will include a guaranteed insurability option, which allow you to increase the amount of cover you have if you reach a major milestone in your life. These typically include getting married, having children, moving house/increasing your mortgage and getting a pay rise/promotion.

Ask your adviser whether you’ll have a guaranteed insurability option built into your personal protection plan.

Josh Martin
Independent Protection Expert at Drewberry

Get personal insurance advice from expert insurance advisers.

Get Expert Personal Insurance Advice

Finding the right Personal Insurance product is only the first step to getting your protection put in place. Not all policies are made equal and different insurers will make different offers. That’s why, to help you find the best product, policy and insurer, you can speak to Drewberry financial advisers.

We offer fee-free and impartial insurance advice and help you find the best personal insurance policy for the best price from the best insurer.

Tom Conner, Director at Drewberry

There are a lot of choices to make in the process of purchasing a personal insurance policy.

To ensure that you find the right Personal Protection product to suit your circumstances, speak to our financial advisers on 01273646484.

Tom Conner
Director at Drewberry

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