Insurance for Protecting income or borrowing

Once you take any kind of mortgage or loan, it is very very important that you make all the repayments in full, both for interest and capital, and the repayments should be made on time. If you are unable to do so you could lose your collateral or security like your home if it's your mortgage or your loan is secured on it. Failure to make payments will also dampen your credit rating severely – which will have long lasting consequences for you financially.

Despite you making all the legal obligations and commitments, sometimes however, the unexpected may occur. For example, you might be fired from your job through redundancy, or find yourself unable to work due to accident or long–lasting sickness. By law, an employer must pay most employees statutory sick pay for up to 28 weeks though this will probably be a lot less than full earnings. Hence, you may not be able to meet your financial obligations. After that, you would probably have to fall back on government supported benefits. These are very limited and means-tested which may mean you won't qualify. Situation will be worse if you are self-employed or running your own business, you have no employer to help, so you would have to turn to the State or government.

The above mentioned situations are the ones when insurance to protect you or your family's income or borrowing can be very useful. Here is a list that quotes some examples below of insurance products and why you might find them useful:

Critical Illness:
The Critical Illness Insurance cover is for covering critical illness. It pays out a lump sum if you're diagnosed with a critical illness, such as cancer, a stroke, MS, a major organ transplant, coronary artery bypass, heart attack and kidney failure. You can use the payout from this insurance policy to pay out for medical treatment, pay off your mortgage, any other kind of loan or anything else. Please note that you get money for your illness, which will be agreed upon when you buy your insurance. There is no guarantee that this money will be able to cover up for your financial obligations.
You must read your insurer's terms carefully, not just for the range of illnesses they cover but also their type. For example, while a heart attack may be covered, a cardiac condition such as angina may not, also not all types and stages of cancer are covered. Hence, be clear about what the insurance covers and what it does not cover. Also get a rough estimate of how much you will be eligible to get in case you are caught with critical illness.
Generally, for a critical illness claim to be successful, you are normally required to survive a month following the diagnosis. This is usually done so that the people seeking insurance don’t hide any critical illness symptoms they may have while buying insurance cover.

In the next article, let’s discuss another kind of protection plan. Please visit the next article.