Protection that would actually do what you need it to

Three kinds of cover, three different jobs

Life insurance pays out if you die. Its job is to clear debts and replace the income your family would lose, for as long as they would need it. Critical illness cover pays a lump sum on diagnosis of a specified serious condition, giving you room to stop work, adapt your home or pay for treatment. Income protection pays a monthly income if illness or injury stops you working, usually until you recover or retire.

Of the three, income protection is the one people most often go without and the one advisers most often put first. You are far more likely to be off work for six months during your career than to die during it, and Statutory Sick Pay replaces only a small fraction of most salaries and stops after 28 weeks.

How much is enough?

A common starting point for life cover is to add up what would need to be paid off or provided: the mortgage and other debts, an income for your family for a set number of years, and future costs such as education, less any cover you already have through work. Employer death-in-service benefits help, but they end when the job does.

The answer is rarely one large policy. A mortgage that reduces over time can be covered by a policy that reduces with it. Income for a young family can be covered more cheaply by a policy that pays monthly until the children are grown than by a lump sum.

Why the paperwork matters as much as the policy

A life policy that is not written in trust is paid into your estate. That can mean a wait for probate before your family sees the money, and it can add the payout to the value of the estate for inheritance tax. Writing the policy in trust usually avoids both and costs nothing extra. For company directors, a relevant life policy paid for by the business can provide the same cover more tax-efficiently. These are the details an adviser gets right at the outset.