Who this is for: Mortgage holders and homebuyers who rely on one or two incomes to cover their monthly outgoings and have not reviewed what they would fall back on if they could not work.
Most people think about cover when they take out a mortgage and then quietly stop thinking about it. The premium leaves the account every month and it can feel abstract because nothing has gone wrong. The financial risk, though, exists from the point a mortgage is taken on.
If you or a partner could not work because of illness or injury, the mortgage, bills and childcare do not pause. Statutory Sick Pay is currently £123.25 a week, or 80% of average weekly earnings if lower, and is payable for up to 28 weeks for eligible employees. For many households, that will cover only part of their regular monthly commitments.
Income cover can pay a regular monthly amount if someone cannot work because of illness or injury. Life cover can pay a lump sum on death, and critical illness cover can pay a lump sum if a policy's specified conditions are met. They are not interchangeable. The right combination, if any, depends on income, employer benefits, mortgage balance, savings and family circumstances.
Employer death-in-service benefits can be valuable, but their terms and availability can change with employment and may not meet a household's full mortgage and ongoing living costs. It is worth checking the detail rather than assuming it covers every eventuality.
The honest answer is that the value of cover depends on what the alternative looks like. A household with several months of savings, a partner who could meet the bills and no dependants may have a different gap from one with a tight joint income, young children and a long mortgage term. Neither is reckless; the gaps are simply different.
A financial risk review is a way to work through the numbers based on a household's real circumstances, understand the gap and decide whether any cover is appropriate.
