Types of life cover and income protection

We know that your family mean the world to you, so it's natural to want to put plans in place to protect them at a time when they could need it the most. Having life insurance cover arranged by Nottingham Mortgage Services offers you reassurance that your loved ones won't be left paying your bills if the worst were to happen to you.

Income protection cover is designed to pay you a monthly income, which could be used to pay your mortgage, rent, bills or other household expenses should you fall seriously ill, have an accident which stops you from working during the length of the policy. 


There are two main types of life insurance cover; term assurance and whole of life cover.

Term assurance cover

Term assurance provides cover for a set period of time, either to tie in with a mortgage or to run for a specific time when you no longer require the cover. Term assurance can be written on a decreasing, level or increasing basis (more info about this can be found here) and the benefit can be paid out as a tax-free lump sum or on a monthly/annual basis (known as family income benefit). Term assurance will pay out on your death as long as it's within the term of the policy, however nothing is payable if your death occurs after the policy expires. Term assurance can be written on a 'single life', 'joint life - first death' or 'joint life - second death' basis (again, more info about this can be found here).


Whole of life cover

There is no set term on whole of life cover as the policy can run for as long as you're alive and paying the premiums. If you want to ensure your family will receive a lump sum then whole of life cover is likely to be for you, as one will be paid upon your death. Just like term assurance, whole of life cover can be written on a 'single life', 'joint life - first death' or 'joint life - second death' basis, however it's only available on a level or increasing basis. Whole of life cover is generally more expensive than term assurance as you're guaranteed that your family will receive money whenever the time comes.


There are other types of cover which are usually purchased alongside term assurance and whole of life cover; these are critical illness, serious illness and income protection cover.

Critical illness cover

Critical illness cover will pay out if you are diagnosed with a critical health issue such as cancer, a heart attack or a stroke, plus many other medical conditions. The number of medical conditions and the terms in which you'll be paid out varies for each insurer so make sure you read the small print before taking out this cover. You can choose if you want the cover to increase or decrease during the term, which is set by yourself. Once the lump sum has been paid, the policy will end. Critical illness cover can be taken out as a standalone policy without having term assurance or whole of life cover.


Serious illness cover

Serious illness cover is similar to critical illness cover, where if you're diagnosed with a serious health issue, the insurer will pay out a lump sum. This type of cover tends to have a lot more medical conditions to qualify for the lump sum. Be aware that with serious illness cover, the pay-out may not be as much as critical illness cover but this is dependent on the severity of the condition.


Income protection cover

Statutory sick pay is currently £94.25 per week - is that enough for you to continue paying bills as well as the general cost of living whilst you're in recovery? With an income protection policy, you can rest easy knowing that loss of earnings you suffer caused by injury or illness during the term of the policy could be covered. Check the terms of the policy as income protection may only cover a percentage of your lost income and you may not be able to claim until the policy has been in place for a set time.


Mortgage protection

Mortgage Payment Protection Insurance (MPPI) is a type of cover which was created to cover the cost of your mortgage payments if unemployment, sickness or an accident prevents you from working.

Nottingham Mortgage Services expert advisers will understand how long your current savings would last you if you were unable to work as this will contribute to your policy calculations and whether you will need MPPI. The first aim of MPPI is to ensure that you keep your home or property and the second aim is to maintain yours and your family’s standard of living.


If you'd like to find out more information about life and income protection or would like to get a quote call Nottingham Mortgage Services on 0344 481 0914.

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