Life insurance and income protection: what you need and when

The main types of cover

Most households need a mix of cover rather than every type. Here is what each one is designed to do.

Life insurance

Life insurance pays out if you die during the term of the policy. The money can be used to repay a mortgage, replace lost income or support your family.

Cover comes in different shapes. Level cover pays the same amount whenever you die during the term. Decreasing cover pays out less over time and is often used alongside a repayment mortgage, where the balance goes down. Family income benefit pays a regular income instead of a single lump sum, until the end of the term.

Critical illness cover

Critical illness cover pays a lump sum if you are diagnosed with one of the serious illnesses listed in the policy and meet the insurer's definition. It is often taken alongside life insurance. Definitions and exclusions vary between insurers, so the wording matters.

Income protection

Income protection pays a regular income if illness or injury stops you working. Payments usually start after a waiting period you choose when you take out the policy, and can continue until you return to work, retire or the policy ends, depending on the terms.

It can be particularly relevant if you are self-employed, or if your employer's sick pay would not last long.

Home and landlord cover

Mortgage lenders usually require buildings insurance on the property. We can also help with contents insurance and with cover for landlords.

When people usually review their cover

There is no fixed schedule, but some life events are a natural prompt to look again.

• Buying a home. A mortgage is a large, long-term commitment. Many people arrange cover at the same time, so the mortgage could be repaid or the payments kept up if something happened.
• Moving home or remortgaging. If you borrow more or change your mortgage term, check whether your existing cover still matches.
• Getting married, moving in together or separating.
• Having children. Dependants change how much your family would need, and for how long.
• Changing jobs or becoming self-employed. You may gain or lose benefits from an employer, such as sick pay or death-in-service cover.
• A significant change in income.

It is also worth looking at older policies from time to time. We offer no-obligation reviews of existing life, critical illness and income protection policies.

Working out how much cover you need

The right level of cover depends on your situation. When we talk it through, we usually look at:

• your outstanding mortgage and other debts
• the income your household would need to replace, and for how long
• how many years until your children are financially independent
• cover you already have, including through work
• what you can comfortably afford each month

Cover should fit your budget. A policy you cannot keep paying for will lapse, and a lapsed policy will not pay out.

Why honest disclosure matters

When you apply, the insurer will ask about your health, lifestyle and job. Answer every question fully and accurately. If information is missing or wrong, a claim could be reduced or refused. We go through the questions with you so nothing is missed.

Some life policies can be written in trust, which can help the money reach the right people more quickly. We can explain whether a trust may be suitable for you.

How we can help

GK Finance is based in Northampton and advises clients across the UK by phone and video. As an appointed representative of HL Partnership, we can compare cover from a wide range of protection providers and explain the differences in plain English.

Every insurer makes its own decision on each application, and cover is subject to the policy terms. You can read more about our protection insurance advice, or see our first-time buyer guide if you are buying your first home.