Scotsman Top Ten Tips

By Peter Haveron

With consumers being increasingly forced to tighten their belts as the cost of living spirals out of control, people have less disposable income to put away for a rainy day. Therefore, having sufficient protection policies in place could be more crucial to ensuring you – and your loved ones – are provided for should you be unable to work, lose your job – or the unthinkable happens.

 

Peter Haveron, Financial Services Manager at French Duncan Financial Services Limited, Independent Financial Advisers – Authorised and Regulated by the Financial Services Authority, provides ten key points to consider when choosing which protection policies are right for you.

1 WHAT DO YOU NEED? Firstly, clarify what you are protecting. Work out what the loss would be should you cease working or you suffer an early death, and whether you or your beneficiaries would need a lump sum, a continuing regular income or both. You also need to look at the type of cover you require – be it a permanent health policy, critical illness cover or a life policy.   

2 QUANTIFY Weigh-up the exact cover that you have at the moment because it’s highly possible you don’t have adequate provision. Find out how long each policy lasts and the period of time it pays out for – e.g. does the policy cover a wide range of critical illnesses? Does it cover you when you retire? Will your family have enough to survive in your absence?

 

3 TIMING Once you have worked out how long your policies will pay out for, ask yourself whether this is long enough for your specific needs. Are your debts either increasing or decreasing over that period of time? If so, you could get a policy to accommodate this - although make sure it still provides adequate cover.

 

4 NO FUSS The kind of cover you require will depend not just on protecting your own finances, but the people that you’re providing for. With that in mind, you need to ensure that the policies will pay out the “right amount of money to the right person at the right time” – with the minimum of fuss.

 
5 WORK BENEFITS What cover is provided by your employer? If a protection policy is paid by your boss, that needs to be factored in. However, you must remember that this cover only applies for as long as you work there and so if you leave, that benefit disappears.

 
6 BEST DEAL Make sure that the rates that you’re paying for your protection policies are competitive. Remember, rates can also be re-brokered for existing policies – and the difference in cost can be significant. An independent financial advisor (IFA) can scour the market for you to ensure you’re getting the best deal.

 

7 RESEARCH Look at the underwriting and claims history of the company you’re dealing with and what their customers say about them; again bearing in mind that you want any claims to be dealt with quickly and without any hassle, with the money going straight to the right person. An IFA can also help in finding this out.

 
8 HEALTHY PROSPECT A point to note about permanent health insurance (income protection) is that it should be tailored to your specific needs. Generally, these policies cover 50% of your income but some insurers will pay more – but never close to your full earnings. However, these payments are generally tax-free.

 

9 REDUNDANCY COVER These arrangements can cover you for paying your mortgage in the short-term but always be careful and remember to read the small print on any policy from your provider.

10 ATTRACTIVE PROPOSITION Although it’s not a necessity through the eyes of mortgage lenders for customers to have protection policies in place, consider how you and your family could pay all your bills should you end up out-of-work, particularly if you’re about to go for a new mortgage or extra borrowing.