Hatice Karadal from Alexander Hall discusses protection insurance and the importance of keeping up payments - but if you are struggling, seek advice
What are insurers doing to help?
During the Covid-19 pandemic, we know that money may be tight for many people, leading to potential missed payments of protection insurance premiums. The protection industry has responded positively to help clients who may be finding it difficult.
We are keeping on top of all insurer updates to help navigate the best options for you, as we believe it is extremely important to have some cover in place, especially when times get tough.
Premium payment holiday
Some leading providers including Zurich, Liverpool Victoria and Vitality have introduced a premium break to vulnerable customers affected by Covid-19. This allows you to stop your premium payments for up to three months while keeping your full cover in place during this time.
Some providers offer this on the basis you repay the premiums in one lump sum, however if preferred you can repay these over a period of time depending on the type of policy you hold. This would give you some financial relief and peace of mind knowing you and your loved ones are still protected.
Career break
Most income protection policies offer a career break option. This allows you to reduce your income benefit to a minimum of £250 while reducing your monthly premiums to for up to 12 months.
This option is usually available on all occupations and can be used if becoming unemployed, or a homemaker or simply taking a career break.
The benefit of this option means you can still claim as you would normally, because the claim is based on your initial occupation prior to taking a career break.
The career break can also be used to help if you are temporarily out of work or are unable to pay the premiums because of personal hardship.
Reduce your premium
You can also opt for a benefit reduction, which allows you to retain your policy with the ability to reduce your benefits and therefore reduce your monthly premiums.
Zurich allows you to reduce your benefit for six months after which the policy can return to the previous level of cover. Vitality also has a similar approach where you can reduce your premium by 25%, 50% or 75% and its cover will reduce by the same percentage.
This is a good option for those who want to have some level of cover in place while having the option to reduce their costs. Depending on the provider this option can be used for three or six months.
Cancelled polices
If you have cancelled your policy or your premiums have not been made due to unpaid direct debts, some insurers such as Royal London, Liverpool Victoria and AEGON can reinstate your policy after six months provided you are still in good health and the missed payments are paid up.
This is also reassuring as many people cancel or miss direct debts when facing financial hardship and assume their cover has ended. It is important to check what you insurer does in regards to missed payments first, rather than assuming they will treat missed payments in this way.
Who is likely to be accepted?
Over the last month, we have seen many insurers offering ways to help those who are financially vulnerable to keep policies in place.
Some of the options mentioned above are based on circumstances affected by Covid-19 and the requirement to be accepted differs depending on the policy type such as life, critical illness and income cover.
The circumstances a protection provider may consider include but are not limited to whether you:
- Have a good history of premium payments and be less than three months in arrears
- Have not already utilised a premium holiday option before
- Have suffered significant drop in your income or usual earnings
- Are not in receipt of furloughed payments.
Here to help
Your best option is usually to keep your polices in place even if you have to amend the amount of cover or the monthly premiums. We appreciate making this decision is not easy and determining the best way to go about it also takes the help of a specialist.
My team and I are on hand to answer your questions and queries. Feel free to contact me on my mobile 07875 80 0422 or you can email me on: Hatice.Karadal@alexanderhall.co.uk to discuss any of the points raised or visit www.alexanderhall.co.uk.
