Life cover
And then there is life cover, or life assurance, which pays out on death and can be used to clear any outstanding financial liabilities such as mortgages, loans or inheritance tax.
And as with critical illness and income protection cover, the extra benefits available can be invaluable in financially supporting the family left behind.
The recently formed 'Protection Distributors Group' called on insurers to help customers meet funeral expenses up to £5000 without waiting for probate. Zurich has already signed up.
It is also important that processes go further, where possible. Many insurers do go further. For example, a firm might pay money up-front to meet funeral costs with no monetary limit, as long as it is within the sum assured.
An insurer might also pay claims in full without grant of probate up to £75,000 to an individual or up to £150,000 if a solicitor is involved. It is worth looking to see which firms offer such additional help for clients.
Most claims paid
As well as the obvious benefits of the policies, providers together with advisers and the industry have worked to promote the benefits of the products.
Initiatives such as the (now ended) Seven Families campaign showcased how Income Protection works and the difference it has made to seven families who would have otherwise had no cover.
But many insurers have also committed to publishing claim statistics to help improve transparency and show that the vast majority of claims are paid successfully year on year.
Last year for example, Zurich paid £224.6m in protection related claims to over 2600 customers with a 95 per cent successful pay out rate. Many other providers have similarly high pay out rates.
Insurers have committed to sharing these numbers to help break down the common misconception that insurers do not pay out.
We also look to provide examples of why the policy may not pay out – where important information has been withheld by the customer for example, or where the policy conditions are not met.
Low take up despite real need
So despite the benefits of the products and the fact that most claims are paid, why is take up so low?
For life insurance, it is estimated that around one in four of us have cover while this drops to around 5 per cent for critical illness cover and even less for income protection.
As part of a global campaign into understanding income protection gaps, Zurich published research called Understanding Income Protection Gaps: Awareness, Behaviour, Choices which shows that British people are not planning financially for long-term sickness.
