In my last post about why insurers want your Fitbit data, I explained that insurance providers may soon be relying on your health data to determine your insurance premiums. In the UK, some providers include fitness tracking for proof of healthy lifestyles and offer rewards to customers that reduce their premiums. While this may be a scary privacy issue, the deeper issue here is that insurers have known for decades that your risk of being diagnosed with a serious illness is significantly reduced if you have a healthy lifestyle.

A recent study from the National Cancer Institute in America strongly supports the theory that regular exercise reduces the risk of many types of cancer. And this research doesn’t stand alone. Other research also shows that regular moderate exercise can reduce your risk of having a stroke by 27%.

If you keep active (with 30 minutes of moderate physical activity three or more times per week), you may be able to lower your insurance premiums. Insurers are increasingly taking lifestyle into account when assessing applications.

If you are interested in learning more about improving your wellness, protecting your business and saving money, I’m hosting an evening event, Financial Wellbeing and Protection for Entrepreneurs with Personal Trainer James Donnelly in the City of London on Tuesday 9 July 2019 from 18:30. It’s a free event that you can’t afford to miss.

What benefits does your employer provide?

Employees are generally entitled to core benefits offered by their company. The mandatory core benefits are:

  • Holiday entitlement: almost all workers are entitled to 5.6 weeks’ paid holiday per year.
  • Workplace pension / auto-enrolment: the minimum contribution level is now 8%, with at least 3% from the employer.
  • Statutory sick pay: You can get £94.25 per week statutory sick pay if you are too ill to work. This is paid by your employer for up to 28 weeks. There is no obligation thereafter.

Employees may also receive wider benefits at the discretion of the employer. These often include:

  • Private medical care
  • Subsidised gym, childcare, cycle to work, etc.
  • Employee share programmes

Income Protection Insurance Explained

Income protection insurance (sometimes known as permanent health insurance) is a long-term insurance policy designed to help you if you can’t work because you’re ill or injured. It ensures that you continue to receive a regular income until you retire or are able to return to work. It is designed to pay you a tax-free regular income of up to 60% of your salary to replace any employment income. The cost of a policy depends on age, job, smoking status and a variety of other factors.

Why Take Out Income Protection Insurance?

Each year, one million people in the UK find themselves unable to work due to a serious illness or injury (according to the Association of British Insurers, 2017). Income protection insurance is designed to give you some cover if you can’t earn an income for those reasons.

If something happened to you, would you be able to survive on savings, or on sick pay from work? If not, you’ll need some other way to keep paying the bills and you might want to consider income protection insurance.

How Much Does Income Protection Insurance Cost?

Income protection insurance is relatively inexpensive. A 35-year-old computer analyst needing cover of £3,000 per month until the state retirement age of 68 would cost around £60 per month.

Critical Illness Insurance Explained

Critical illness insurance was invented by Dr Marius Stephanus Barnard, a South African cardiac surgeon, in 1983. Part of the team that performed the world’s first human-to-human heart transplantation in 1967, he became frustrated by the fact that he was saving people from death, but they were so impaired that they had difficulty surviving financially. As a result, he persuaded the South African insurance companies to introduce a new type of cover. The rest, as they say, is history.

Critical illness cover pays out a lump-sum should you suffer from one of the specific medical conditions or injuries listed in the policy. Examples of critical illnesses that might be covered include stroke, heart attack, cancer and multiple sclerosis.

Why Take Out Critical Illness Insurance?

Although you may never have been ill, your chances of suffering from a serious illness are probably much greater than you realise. If you receive a cancer or serious illness diagnosis, you don’t want to have to worry about money.

How Much Does Critical Illness Insurance Cost?

Critical illness insurance is only available up until you are aged 70-75 and is based on your health, your postcode, and to some extent, your profession.

As critical illness insurance has a higher chance of payout than life insurance, it’s more expensive, and the older you get the more expensive it becomes to take out a policy. Usually, for every unit of life insurance you insure, a unit of critical illness cover will cost 6-10x more.

Case Study

Mark Hudson is 35 and, although in good health, he has a family history of heart attacks. He’s an architect and wants critical illness to cover him until he’s 70.

This needs to be index-linked because of its long-term nature and, if he’s looking for a pay-out of £500,000, the starting point for his premiums will be around £185 per month.

However, depending on the cover provider and Mark’s particular circumstances, his premiums may be loaded (increased) to take account of his family history.

Completing your Financial Plan

It’s never easy to think about a time when you may be ill, and it’s more important than ever to do your best to ensure that the odds are stacked in your favour by maintaining a healthy lifestyle. But the fact the remains that if you want peace of mind as well as financial security should the worst happen, income protection and critical illness insurance are not things you can afford to ignore.

If you want to find out more, I’m hosting an evening event: Financial Wellbeing and Protection for Entrepreneurs with Personal Trainer James Donnolly in the City of London on Tuesday 9 July 2019 from 18:30. It’s a free event, and I hope to see you there.

Derek Shiels

Derek Shiels

Derek Shiels is the Managing Director of Lyfe Wealth.

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