Our handy guide gives you an idea of the sort of cover that might be best for you depending on your circumstances.
Whilst you don’t have anyone financially reliant on you, you are still reliant on your own ability to continue to work and earn to support your mortgage and your lifestyle. In the event of an accident or serious illness, your income could be significantly reduced if you only have state benefits to fall back on and even if you have employee sick benefits, these do tend to stop before the need for them does.
John is 25 and has just bought his first house.
He has a mortgage of £125,000 which is over 25 years on a repayment basis.
He is self employed, working as an IT consultant.
Whilst you don’t yet have any financial dependents, you may well be financially reliant on each other. Would mortgage and lifestyle costs be as manageable without both incomes? If the answer to this is no, then it would be a good idea to ensure that both incomes are protected, or at the very least, your outgoings can be reduced should the worst happen, be that death, or critical illness.
Ideally clearing or significantly reducing your mortgage is a good place to start as living costs would be much more manageable for your surviving partner without the expense of the mortgage.
Ian (31) and Sarah (29) have just bought their first home.
Ian is a teacher on a salary of £35,000 and Sarah works in Marketing and earns £30,000.
Their mortgage is £170,000 over 30 years on a repayment basis.
Whilst there are children at home your budget is always going to be stretched, however the need for protection is even greater as you and your home provide stability for your children as they grow up. Children are likely to be financially dependent on you for nearly as long as a mortgage term so it is important that this is factored into your protection planning. Reliance on one income or the cost of high childcare fees means that protection against the loss of income, however it occurs, is essential.
Ideally an element of all of these policy types is better than covering to the max in one or two areas – it really is a question of eggs and baskets.
Peter and Janice are 35 and have 2 small children.
They own their property on which there is a mortgage of £135,000.
Peter earns £50,000 as an accountant and Janice is currently a full time mother.
As a sole household earner, it is down to you and your ability to continue to earn in order to maintain your mortgage and the lifestyle you want for yourself and your child/children. Loss of income through incapacity or serious illness could have a major impact on this. In the event of your death, who would look after your dependents and would you need some financial provision for this?
Lucy is a single mother with a 2 year old daughter.
She currently has a mortgage of £60,000 on the property she is living in.
She works as a lecturer at the local university whilst her daughter attends nursery
Whilst pension income will not be affected by long term incapacity or serious illness, it could cease or dramatically reduce in the event of one or the others death. If there are still financial commitments like mortgages to be paid this could be a problem on reduced income and even without this, the cost of the regular bills would still need to be met.
Fred and Josie are both 68 and retired.
They have a small mortgage of £55,000 and both are in receipt of the state pension, although they mainly rely on Fred’s personal pension