The Association of British Insurers (ABI) reported this week that in the three months between March to May UK life insurance companies had paid out £1mn per day to support families coping with Covid-19 deaths. Insurers received 7,000 claims and had paid out a total of £90mn over the three months. The average payout was £63,000 on privately held policies and£137,000 on group policies. Most group life insurance policies are taken out by employers.
If you have a family, life insurance is perhaps the single most essential component of your financial planning. As Roshani Hill, the ABI’s Assistant Director, Head of Protection and Health, said when announcing the figures, ‘Every COVID-19 death is a tragedy. While no amount of money can ever replace a life, insurers have been doing all that they can to help families cope financially through these unprecedented and distressing times.’
I don’t think you will find any financial planner that would not concur with that statement. If you are the primary income earner and you don’t have life insurance in place you are exposing your family to severe financial risk and should address this urgently.
However, what also caught my eye in the ABI’s announcement was the comment that the figures included a ‘small number of critical illness and total permanent disability claims.’ I have written about critical illness insurance previously, and I think it is worth emphasising the importance of these policies again.
While life insurance will provide your family with financial protection if you die, it will not help if you fall seriously ill. Critical illness cover will. It will pay on immediate diagnosis a lump sum payment to help cover any required expenses including your rent or mortgage, your bills, loan payments, food, school fees and all those other essential expenses. Several of my clients over the years have been fortunate enough to have one of these policies in place when falling ill and the resulting payout has proved a godsend to their families, providing financial safety net while they battled illness.
However, the latest figures from Friends Provident International released last month revealed that less than a quarter of the population has protection against serious illness, Women are particularly at risk with only 19% having a policy in place.
Serious illness is a significant threat to financial security and can strike at any time. The average claim in the UAE over the past two years was made at 47 years of age and the youngest claim at just 31.
If the Covid crisis has taught us anything, it is that serious illness is an ever-present threat, and it is prudent to take measures to protect your family from the effects.