Protection: insuring more than just your life

Insurance – any kind of it – is aimed at mitigating the grief, frustration, and disappointment from something not going to plan. Whether it is an accident, investments underperformance or a health issue, insurance companies have usually got your back. Nevertheless, providing cash compensation at your time of need is not the sole benefit the various kinds of coverage products can provide.

Life Insurance

The primary aim of life protection is to support your loved ones in case anything happens to you. However, there is room for more. For example, you can use insurance to save up for your child’s education or add a little bit extra to your pension.

Usually people think that the only condition on which the insurance company will pay out is in the event of the death of the insured person. That is indeed the case with straight-up, classic life protection – however, there are other options, such as compensation in the event of illness or trauma. This type of protection means your family will not suffer from loss of income while you recover, or if the compensation is substantial but not entire, you will not be dealing with an utterly unbearable burden.

In such cases, you can choose the size of the payments that you will receive, the duration of the coverage, and the list of possible risks against which you would like to insure. The company manager will then calculate the instalments you will have to pay. These typically vary from company to company.

It could also be a good idea to insure your debt – so that, should anything happen to you, your family would not have to be liable for your debt. If you choose this product, the insurance company will pay the bank.

Savings Insurance

Savings accounts meet the world of insurance. With traditional savings insurance there is a fixed income attached, but this is typically lower than the income on investment insurance.

After you sign your insurance contract, there are two possible outcomes:

  • An insurance event (death) has occurred, and your beneficiaries will get the payment specified under contract
  • An insurance case has not occurred, and you get your savings back

Therefore, you can be saving for something important for 10 years, and throughout that period you can feel secure in the knowledge you have life insurance. You will be able to choose the size of instalments and the final payment. The contracts can last 5 to 20 or more years. It can be less than 5, of course, but in that case it will have a lower yield and higher tariffs (instalments).

Voluntary Pension Insurance

Voluntary pension insurance does seem a lot like savings insurance, but here the event for which you are saving up is your retirement. Once reached, you can choose the period of time you (or someone else) will be receiving extra pension. The rest is fairly similar – you pick how much extra pension you want, and then pay regular instalments.

There are a few pension options from which you can choose:

  • Lifelong – you set the date from which you will be receiving this pension, and if anything terminal were to befall you, the unpaid amount will be given to your specified beneficiary
  • Term-Time – you set out the period during which you will receive your pension (such as 60 to 75 years)

Voluntary pension insurance contracts may include some extra conditions – such as payments in the event of various health issues and accidents. These conditions will not, however, be an automatic staple of the contract. They will need to be discussed and insured against (or not) at an additional premium.

Investment Insurance

The insurance company, in this case, takes responsibility for the funds you have set aside for investment. The money is split into two parts. The first one will be there to guarantee you the return of your money in case of unfavourable market conditions. The other one, contrariwise, will generate returns on the investments in question.

You should keep in mind that your contract might not totally protect your capital from the adverse market conditions. To check for that, you will need to read your contract very closely – or ask a professional lawyer.

You will be able to choose one of the investment programmes set out by your insurance company. Each company decides individually what will go into an investment portfolio and devises offers that follow different strategies.  Usually, the strategies fall under three categories – aggressive, balanced, or conservative. As you would expect given their names, the aggressive strategy comes with a higher yield, but also higher risks. Contrariwise, the conservative strategy reduces those risks – but at the cost of lower returns.

A worthy consideration with investment insurance is that unlike bank deposits, your money is not protected. (As it is under the FSCS scheme with banks.) Hence, you will not receive anything if your insurance company goes bankrupt.

Furthermore, you should check the conditions upon which your contract can be terminated  – willingly or not. Remember, both scenarios are possible, and you should thoroughly understand the consequences born of such termination. It is vital to check the reliability and reputation of the company you intend to sign a contract with.

Financial Advice

Moreover, if you are seriously considering your investment options, doing so through an insurance company might not necessarily be the best idea. An alternative one would be to a approach a financial adviser. First, a financial adviser will be able to build you an investment portfolio suited to your specific needs and circumstances. Moreover, they can also offer support throughout your journey, lifelong or otherwise, as an investor.

We cannot strongly enough emphasise the importance of reading and understanding your contract thoroughly from beginning to end. It is highly advisable not to neglect the help of a professional lawyer when dealing with these types of contracts.

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