In an ideal world clients would be able to afford as much protection cover as they wanted but few would describe current times as anything approaching ideal. But this doesn’t mean that they have to indulge in an either/or decision that results in missing out on some essential protection altogether. There is much to be said for splitting what outlay there is available to obtain a small amount of cover from a number of different products rather than opting for a large amount of one.
An adviser who recommends life cover but no critical illness cover could, for example, find themselves with some awkward questions to answer if their client developed a critical illness. The same applies if they recommend critical illness cover but no income protection and their client becomes unable to earn a living as a result of a bad back or stress related condition. Neither condition would be covered under a critical illness plan – unless the problem was so serious that it qualified for a total permanent disability claim – but both would be covered by income protection.
Arranging a small amount of each cover can provide the best of both worlds. The client is protected against a broader range of eventualities and, if they qualify for a pay-out from both covers, the benefits should complement each other well. The regular income from the income protection should hopefully be sufficient to take care of most of the regular bills whilst the lump sum from the critical illness cover could be used to finance one-off costs such as a holiday for recuperation purposes or even minor adaptations to the home that become necessary to accommodate a disability.
Fortunately, protection insurers facilitate the task of arranging multiple products by offering flexible menu-based formats that allow cover to be mixed and matched cost-effectively and with a minimum of hassle.
Such menus can also offer the opportunity to have either level, decreasing or increasing cover and may even allow life and critical illness cover payments to be made as a regular income rather than as a lump sum. Taking advantage of such flexibility can greatly reduce costs. For example, choosing an income as opposed to a lump sum could reduce the premium significantly.
A menu-based product can also help to cater for lifestyle changes such as marriage, divorce, and promotion or moving home by adding or removing covers or, subject to specified limits, increasing or reducing cover amounts on existing covers without having to provide any further medical evidence.
The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.
All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.