Life changes can occur at any time. While you can plan financially for some events, such as having children, moving house, or retiring, others can be unexpected.
This is where getting the right protection in place is key, giving you peace of mind that if something unexpected does happen, you and your family will be covered financially.
Read on to find out how income protection, critical illness cover, and life insurance can help ensure that you have one less thing to worry about in the event of an emergency.
Income protection can help to cover your monthly essential costs
If you’re unable to work due to illness or injury, income protection can replace a percentage of your income.
Covering your monthly costs if you can’t work could add pressure to an already stressful situation. Without an income, you could be dependent on sick pay, savings, or potentially state benefits.
In the UK, Statutory Sick Pay (SSP) is £118.75 per week for up to 28 weeks in 2025/26, if you meet certain criteria. If you’re outside the UK, you may not have the same or any sick pay provision. The best way to ascertain what you’d be paid if you’re off sick is to check your employment contract.
If you’re self-employed, you won’t be eligible for sick pay – you may be able to claim other benefits if you’re unable to work, but these will be subject to eligibility criteria.
Income protection can give you peace of mind that, if your income does drop temporarily, you’ll still be able to cover your major monthly outgoings. It generally covers any illness or injury that stops you from working for a period of time.
This type of protection offers monthly payments to replace part of your income. You’ll need to calculate how much you need for your essential outgoings. If you take out a long-term policy, remember to factor in inflation to cover any rises in bills.
According to Which?, standard payouts are usually based on 50-70% of your income, and these payments are tax-free.
Critical illness cover pays out a lump sum after a diagnosis
Critical illness cover pays out if you’re diagnosed with a serious condition listed on your policy.
While nobody wants to contemplate becoming seriously ill, this isn’t about creating doom-laden scenarios. Rather, it’s about taking sensible, rational precautions that will help you and your family manage financially if something does happen.
Payouts are made as a lump sum, and you can generally choose from two types of cover: level or decreasing. Level cover can help with bills, mortgage payments, school fees, or health-related costs, such as modifying your home to make it easier to get around.
Decreasing cover is used for repaying debts, such as loans or your mortgage. This can often be a cheaper option since you’ll need a lower payout as your debts go down.
Life insurance reassures you that your loved ones and dependants will be looked after
Life insurance can provide your family with a cash payout in the event of your death, giving you peace of mind they’ll be looked after.
There are two main types:
1. Term life insurance
This type of life insurance covers you for a specific period and pays out if you die during that time frame.
Again, you can choose level cover, which pays out a lump sum that can be used for living costs. Opting for increasing cover as part of this policy will increase your monthly premiums and any payouts in line with inflation.
Alternatively, you can choose decreasing cover, where the value of your policy decreases over the term until it reaches zero. This is a good option if you’d like to cover a remaining mortgage, outstanding loan, or other debts.
2. Whole of life insurance (life assurance)
As the name suggests, this covers you for the whole of your life, making a guaranteed payout when you die.
You can usually choose level cover, which offers fixed terms for your premium and payout for life, or reviewable cover. The latter sees your policy reviewed every 5-10 years. Your premiums are likely to increase as you age or the amount covered may be reduced.
One significant advantage of both types of life insurance is that you can write them into a trust, which means the payout may not be included as part of your estate for Inheritance Tax (IHT) purposes.
Living outside the UK may mean you need a different type of cover
If you live overseas, you’re likely to be under a different set of rules or regulations than in the UK. It’s always a good idea to consider that:
- Different countries are likely to have different sick pay, healthcare, and employment legislation
- Your UK policy might not be valid abroad, so if you move mid-policy, make sure you check your policy terms
- If you’re returning to the UK after time overseas, you may need to review, update, or restart your policies.
Essentially, it’s always better to double-check to ensure you have continuous cover, rather than assume and risk being uninsured.
Get in touch
If you’d like to talk to us about any type of protection, whether you’re UK-based or overseas, we’d be happy to help. Please get in touch by emailing enquiries@gag-ltd.com or calling 0131 363 0090.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Note that life insurance and financial protection plans typically have no cash in value at any time, and cover will cease at the end of the term. If premiums stop, then cover will lapse.
Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.