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Understanding protection insurance Checklist 

  • The essentials: When it comes to protection insurance is life insurance (if you have dependants) and income protection if you work for a living
  • Get the right product: Make sure it's pure income protection you're taking out, not payment protection. You can tell because income protection is based on your medical history and details
  • Check sick pay: If you are employed, always find out what your employer will pay and for how long before deciding how much cover you need
  • Self-employed: If you're self-employed consider how long you could live on savings or (if you are part of a couple) on your partner's income if you couldn't work
  • Covered for sickness but not redundancy?: You can buy cheap, good value redundancy-only payment protection from independent providers. You can find out more by looking at the comparative tables offered by the regulator for financial services - the Financial Services Authority (FSA)
  • Get the right advice: When selling protection insurance there are two levels of service financial advisers can give - information only or advice. Always take full advice when buying protection insurance. Only that way can you be sure that the policy recommended is the most suitable for you depending on your particular needs and circumstances
  • See an independent financial adviser: Don't buy protection insurance offered to you by your mortgage lender or loan provider, it's unlikely to be the best value. Always go to an independent financial adviser that specialises in protection insurance (see contacts). Make sure your adviser explains the different types of policies available and why he or she is recommending a particular type. See the table on the page called Types of protection insurance
  • Income protection: This is nearly always the most appropriate type of policy. If an adviser recommends you something else, be wary
  • Critical illness insurance: This is not a replacement for income protection.  It can be a useful addition to your protection insurances, but should only be considered if you have good income protection in place (either through your employer or through a private policy)
  • Avoid taking out payment protection insurance on loans and credit cards: It offers little benefit - see our Payment Protection campaign to help you get your money back if you have been mis-sold.

 

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