17 Nov 2020
Guest post by Ben Bendall of Reassured
The Coronavirus pandemic has forced many people to make significant changes to their lives, whether it be changes to their daily routine, changes to their careers or financial changes.
More than ever the need for financial protection has been highlighted during these unprecedented times, but what options are available to you?
Below, FCA regulated life insurance broker Reassured, detail some of the suitable financial protection options that are available for teachers.
Death in service
Most teachers will benefit from death in service. Death in service is a form of financial protection that will pay out a cash lump sum to your loved ones if you pass away while in service with your employer.
There’s often a misconception that you need to pass away at your place of work for a pay out to be issued, but this isn’t true. You simply need to pass away whilst being employed by an employer who offers this benefit.
Most commonly, death in service for teachers is provided by Teachers Pensions but some employers may choose an alternative, independent, provider. Death in service through the teachers’ pension scheme is paid out at 3x your annual salary.
While death in service is an extremely useful benefit, it’s unlikely that this pay out would be sufficient to cover all of your financial obligations, such as paying off a mortgage in full, covering future living expenses and/or paying for your funeral.
For this reason, many choose to take out their own person protection, to ensure all aspects of their life are comprehensively protected.
You should also note that if you leave the teaching profession, your death in service benefit won’t follow you. This highlights the need for having your own personal protection to ensure you’re covered whether you’re in employment or not.
If you want to find out more about your death in service policy, it’s best to check your contract of employment or ask your employer who will be able to provide the full details.
A life insurance policy can be taken out to provide an extra layer of protection alongside your teachers death in service benefit. Cover starts from approximately 20p-a-day for £200,000 of cover, however, the higher the risk you pose to the insurer, the more you will pay.
A life insurance policy will provide a cash pay-out to your loved ones if anything were to happen to you.
Unlike a death in service benefit, you have the flexibility to choose your level of cover (how much you’d like to be paid out) and how long you would like your policy to last for (the policy term).
Most commonly, your options will include term life insurance or whole of life insurance. With term life insurance, your policy will last for an agreed period of time, (this can often be up to 40 years) and if you pass away during this time, a pay-out will be made.
Whereas whole of life insurance will last for the rest of your life, guaranteeing a pay-out to your loved ones when (not if) you pass away. It’s important to note that this can become a costly option if the policy is taken out at a young age and you may pay more in, than it will ever pay out.
Which type of cover will be best suited to you will depend on what it is you want to protect.
Most commonly, life insurance is used to protect:
- Your mortgage
- Family living costs
- An inheritance
- Rising funeral costs
Terminal illness cover often comes as standard with any term life insurance policy and will provide protection if you’re diagnosed with a life-threatening illness and are predicted to pass away within 12 months.
Critical illness can also be added for an additional fee, which will allow you to make an early claim if you’re diagnosed with a life-threatening illness and are left unable to work. The pay-out provided can help to replace any lost income.
Income protection insurance
Income protection does what it says on the tin - protects your income.
If you were to become seriously ill or injured and left unable to work for a extended period of time, income protection will pay out to help you cover your lost income.
The pay-out you receive will typically be a percentage of your earning, (for example, 50% - 70%).
Although it’s likely you’ll receive sick pay from your teaching employer, this may not be enough to cover all of your financial commitments.
Income protection can help provide the funds for you to pay rent, keep up with bills and cover your daily living costs.
What form of financial protection will be the best option for you will depend on your individual needs and circumstances, for example your age, whether you own a property and whether you have dependants who reply on you financially.
You may feel that your teachers death in service benefit is adequate cover, or you may want to add an extra layer of protection to offer peace of mind no matter what life throws your way.
Comparing multiple quotes is the best way to find the right policy at the best price, as monthly premiums can vary wildly due to different underwriting criteria. You can do this online yourself, using a comparison website or you can let an life insurance broker do this on your behalf.
It is very difficult to consider what would happen to our loved ones’ should anything happen to us. However, we hope this post has helped you understand your available policy options in 2020.
The views expressed by the writer and recommendations do not necessarily reflect the views and recommendations of The Educator.
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