Protection & Insurance FAQs

Common Questions About Life Insurance, Critical Illness Cover, Income Protection and Business Protection

Protection is about considering what could happen financially if life does not go according to plan.

A mortgage is often one of the largest financial commitments a household takes on, but protection is not only about repaying a mortgage. Your income may also support everyday bills, childcare, food, utilities and the lifestyle of your family.

For business owners, the financial consequences of illness or death can extend beyond the household. A business may depend heavily on a particular director, shareholder or key employee.

At Cambs Ely Mortgages, we help clients understand the different types of protection available and how they can work together.

Below are answers to some of the most common protection and insurance questions we receive.

Understanding Protection Insurance

What is protection insurance?

Protection insurance is a broad term covering policies designed to provide financial support when certain events occur.

Depending on the policy, this could include death, diagnosis of a specified critical illness or being unable to work because of illness or injury.

Different policies protect against different risks, so there isn't one type of protection that covers everything.

Do I need protection insurance?

Protection isn't automatically appropriate for everyone.

The starting point is understanding what would happen financially if you died, became seriously ill or were unable to work.

You can then consider your existing savings, employer benefits, other insurance and family circumstances before deciding whether additional protection is appropriate.

Is protection only for people with mortgages?

No.

People often consider protection when arranging a mortgage because buying a home creates a significant financial commitment.

However, renters, self-employed people, parents, business owners and people without mortgages can also have financial commitments that depend on their income.

What types of protection are available?

Common forms of personal protection include:

• Life insurance

• Critical illness cover

• Income protection

There are also protection arrangements designed specifically for businesses and business owners.

Life Insurance

What is life insurance?

Life insurance is designed to pay a benefit if the person insured dies during the policy term, subject to the policy terms and conditions.

The money could potentially be used to repay a mortgage, support a family or help meet other financial commitments.

How does life insurance work?

You select an amount of cover and, usually, a period for which the cover will run.

You pay premiums for the policy.

If a valid claim is made during the policy term, the insurer pays the benefit in accordance with the policy terms.

Do I need life insurance for a mortgage?

Life insurance isn't generally a legal requirement simply because you're taking out a mortgage.

However, it can be important to consider what would happen to the mortgage and household finances if one of the people responsible for paying it died.

How much life insurance do I need?

There isn't one amount that is suitable for everyone.

The amount can depend on your mortgage, other debts, household income, dependants, existing savings and what you would like the policy to achieve.

For some people, the objective may primarily be repaying the mortgage. Others may want to provide additional financial support for their family.

How long should life insurance last?

That depends on what you're protecting.

If the main objective is mortgage protection, the mortgage term may be relevant.

If you're also protecting family income or providing for children, other timescales may need to be considered.

Can couples have joint life insurance?

Potentially.

A joint life policy can cover two people under one policy.

Depending on the policy structure, it will commonly pay following the first qualifying claim and then end.

Two individual policies can operate differently because each person has their own cover.

The appropriate structure depends on your circumstances and objectives.

Level & Decreasing Life Insurance

What is level term life insurance?

Level term insurance normally provides a fixed amount of cover throughout the policy term, assuming the policy remains in force.

The amount of cover does not automatically reduce as a repayment mortgage balance falls.

What is decreasing term life insurance?

Decreasing term insurance is designed so that the amount of cover reduces over time.

It is often considered alongside a repayment mortgage because the outstanding mortgage balance should also reduce over time.

However, the way the cover decreases and the way a mortgage balance reduces are not necessarily identical.

Which is better: level or decreasing cover?

Neither is automatically better.

The appropriate structure depends on what you want the policy to achieve.

If the objective is primarily to provide cover alongside a reducing repayment mortgage, decreasing cover may be considered.

If you want the amount of cover to remain broadly unchanged throughout the term, level cover may be more appropriate.

Critical Illness Cover

What is critical illness cover?

Critical illness cover is designed to pay a benefit if the person insured is diagnosed with a specified critical illness and the policy definition is met.

The conditions covered and definitions used vary between insurers and policies.

Does critical illness cover pay for every serious illness?

No.

Critical illness policies cover specified conditions according to the definitions contained within the policy.

Being seriously unwell doesn't automatically mean a claim will be paid.

The diagnosed condition must meet the relevant policy definition.

What illnesses does critical illness insurance cover?

Policies commonly cover a range of serious medical conditions, but the exact conditions and definitions vary.

This is why comparing critical illness policies purely on price can be misleading.

The quality and scope of the cover should also be considered.

Is critical illness cover the same as life insurance?

No.

Life insurance is primarily designed to pay following death during the policy term.

Critical illness cover is designed to provide a benefit following diagnosis of a covered critical illness where the policy definition is met.

They protect against different financial risks.

What could a critical illness payment be used for?

The benefit could potentially be used for any purpose.

Depending on your circumstances, this could include reducing or repaying a mortgage, meeting household expenses, adapting a home or providing financial flexibility while dealing with illness.

Life Insurance vs Critical Illness Cover

Do I need life insurance if I already have critical illness cover?

The two types of cover address different events.

Life insurance is primarily concerned with the financial consequences of death.

Critical illness cover is concerned with the financial consequences of surviving a specified serious illness.

Having one does not necessarily remove the need to consider the other.

Is critical illness cover more important than life insurance?

There isn't a universal answer.

The appropriate priorities depend on your circumstances, dependants, income, existing benefits and the financial consequences of different events.

Protection planning is about identifying those risks rather than assuming one policy is always more important than another.

Can life insurance and critical illness cover be combined?

Potentially.

Some policies can combine life and critical illness benefits.

The way a combined policy operates should be understood carefully because a successful claim may affect or end the remaining cover depending on the policy structure.

Income Protection

What is income protection?

Income protection is designed to provide a replacement income if illness or injury prevents you from working and the policy conditions are met.

Rather than normally providing one large lump sum, income protection can provide regular payments.

Why would I need income protection?

Your ability to earn an income may be one of your most important financial assets.

If your salary stops, your mortgage or rent, utilities, food and other household costs may continue.

Income protection is designed to help address that risk.

How much income can income protection cover?

Insurers normally limit cover to a proportion of eligible income rather than replacing all of your earnings.

The amount available depends on the insurer, your income and policy terms.

What is a deferred period?

The deferred period is the period between becoming unable to work and the policy benefit becoming payable, assuming the claim meets the policy conditions.

A suitable deferred period may depend on your employer sick pay, savings and how long you could manage financially without your normal income.

How long can income protection pay for?

This depends on the policy.

Some policies can potentially pay for a limited claim period, while others can provide benefits for considerably longer, subject to the policy terms and continued eligibility.

Does income protection only cover accidents?

No.

Income protection can cover inability to work because of illness or injury, subject to the definitions, exclusions and conditions of the particular policy.

Income Protection vs Critical Illness Cover

What is the difference between income protection and critical illness cover?

Critical illness cover normally provides a lump-sum benefit following diagnosis of a specified condition where the policy definition is met.

Income protection is designed to provide regular income if you're unable to work because of illness or injury and meet the policy's definition of incapacity.

The trigger and type of benefit are therefore different.

Which is better: income protection or critical illness cover?

Neither is automatically better.

They protect against different risks.

Someone could be unable to work for a long period without having an illness covered by a critical illness policy.

Equally, someone could receive a critical illness diagnosis while still being able to work.

The two forms of protection can therefore serve different purposes.

Can I have both?

Potentially, yes.

Depending on your needs and budget, income protection and critical illness cover can form different parts of a wider protection plan.

Protection for Homeowners

Should my life insurance match my mortgage?

It can, if the primary objective is to provide enough money to repay the mortgage following death.

However, your protection needs may extend beyond the mortgage.

You may also want to consider household bills, dependants, other debts and ongoing family needs.

What happens to my mortgage if I die without life insurance?

The mortgage doesn't simply disappear.

The outstanding debt remains secured against the property and will need to be dealt with as part of the estate and wider financial arrangements.

The precise legal position will depend on how the property and mortgage are owned.

Should both people on a joint mortgage have protection?

It is sensible to consider the financial impact of either person's death or illness.

Even where one person earns less, their contribution to household finances, childcare or other responsibilities can still have significant financial value.

Protection for Renters

Do renters need protection?

Protection isn't only relevant to homeowners.

Rent, utilities, food and other living expenses still need to be paid if your income stops.

Income protection, life insurance and critical illness cover may therefore be relevant to renters depending on their circumstances.

Why would I need life insurance if I don't have a mortgage?

A mortgage is only one reason someone may consider life insurance.

If a partner, children or other dependants rely financially on you, life insurance may help provide financial support following your death.

Protection for First-Time Buyers

When should a first-time buyer think about protection?

Buying a first home can be a natural point to review protection because you're taking on a new financial commitment.

Protection can be discussed during the mortgage process so that you understand the options before completing your purchase.

Do I need to buy protection from my mortgage lender?

No.

You don't normally have to purchase life insurance, critical illness cover or income protection from the bank providing your mortgage.

Should protection start before or after completion?

The appropriate start date depends on the policy, circumstances and what is being protected.

For example, buildings insurance can become relevant at a particular stage of a property transaction, while personal protection may have different considerations.

The timing should be discussed as part of the overall process.

Protection for Self-Employed People

Is income protection important if I'm self-employed?

It can be particularly relevant because self-employed people may not have access to the same employer sick-pay arrangements as some employees.

If you cannot work, the financial impact can therefore be significant.

Can self-employed people get income protection?

Potentially, yes.

The insurer will need to understand your occupation, income and circumstances.

Evidence of earnings may be required.

How is self-employed income assessed for income protection?

This depends on the insurer, business structure and policy.

The insurer will have its own rules regarding the income that can be insured and the evidence required when applying or claiming.

What if my income changes after I take the policy?

Significant changes in income can be relevant, particularly because income protection benefits are normally linked to earnings.

Policy terms should be reviewed and appropriate advice obtained where circumstances change.

Employer Benefits

Do I need personal protection if my employer provides benefits?

Employer benefits should be considered before deciding how much personal protection may be required.

You may already have benefits such as sick pay, death-in-service cover or other workplace protection.

However, employer benefits may have limitations and may end if you leave the employer.

What is death-in-service cover?

Death-in-service is an employer benefit that may provide a lump sum if you die while employed by that organisation, subject to the scheme rules.

It isn't the same as personally owned life insurance.

Should I rely entirely on death-in-service?

That depends on your circumstances.

Employer benefits can be valuable, but you should understand how much cover is provided, when it applies and what happens if you change employer.

Does employer sick pay replace the need for income protection?

Not necessarily.

The amount and duration of employer sick pay vary considerably.

Understanding how long your employer would continue paying you can help determine whether there is an income gap that you may wish to protect.

Protection Costs

How much does life insurance cost?

The cost depends on factors including the amount of cover, policy term, age, health, smoking status and type of policy.

The insurer will assess the application before confirming the final terms.

Is critical illness cover more expensive than life insurance?

It can be because the policy covers additional risks.

The cost depends on the amount and type of cover, policy term and the applicant's circumstances.

How much does income protection cost?

The premium can depend on your age, occupation, health, amount of benefit, deferred period, claim period and policy features.

There isn't one standard price.

Should I choose the cheapest protection policy?

Price matters, but it shouldn't be the only consideration.

Policy definitions, exclusions, additional benefits, claim periods and the quality of the cover can differ.

A cheaper policy isn't necessarily better value if it doesn't provide the protection you need.

Medical Underwriting

Will I need a medical examination?

Not necessarily.

Many applications can be assessed using information provided on the application.

Depending on your health history, age, amount of cover or other factors, the insurer may request additional medical information or examinations.

Do I need to disclose previous medical conditions?

Yes.

Insurance applications should be answered fully and accurately.

The insurer needs the requested information to assess the risk and determine the terms it can offer.

What happens if I don't disclose a medical condition?

Failing to provide accurate information can affect the policy and may affect a future claim.

You should answer the insurer's questions honestly and carefully.

Can I get protection if I have a medical condition?

Potentially.

Having a medical condition doesn't automatically mean protection is unavailable.

The insurer may offer standard terms, adjust the premium, apply an exclusion, postpone a decision or decline cover depending on the circumstances.

Different insurers can also assess medical conditions differently.

What if I've previously been declined for insurance?

A previous decline doesn't necessarily mean every insurer will reach the same decision.

However, previous applications and decisions should be disclosed where requested.

Understanding the reason for the previous decision can be important before approaching another insurer.

Smoking & Protection Insurance

Does smoking affect the cost of protection?

It can.

Insurers generally consider smoking and nicotine use when assessing life and health-related protection.

Smoker rates can differ from non-smoker rates.

What counts as smoking?

Insurers have their own definitions concerning cigarettes, vaping, nicotine products and how long someone must have stopped using them before being considered a non-smoker.

The application questions should be answered according to the insurer's wording.

Existing Protection Policies

Should I cancel my existing policy when arranging new cover?

Not before the replacement cover has been fully considered and, where appropriate, put in force.

Cancelling existing protection too early could leave you without cover.

There may also be disadvantages to replacing an older policy because your age, health or circumstances may have changed.

Should I review an old life insurance policy?

It can be sensible to review existing protection when your circumstances change.

Buying a property, increasing a mortgage, having children, changing employment, getting married, separating or starting a business can all alter your protection needs.

Is a newer policy automatically better?

No.

Older policies may contain valuable terms or may have been arranged when you were younger or in a different state of health.

Existing cover should be understood before deciding whether it should be changed or replaced.

Can I keep my existing policy and add more cover?

Potentially.

If existing protection remains suitable but no longer provides enough cover, additional protection may sometimes be considered rather than replacing everything.

Indexation

What is index-linked protection?

Some protection policies allow the amount of cover to increase over time.

This can help the value of the benefit keep pace with inflation rather than remaining fixed for many years.

Why can indexation be useful?

The purchasing power of a fixed amount of money can reduce over time because of inflation.

Indexation can help protection remain more relevant over a long policy term.

The cover and premium may both increase according to the policy terms.

Writing Life Insurance in Trust

What is a life insurance trust?

A trust is a legal arrangement that can potentially determine who receives policy proceeds and how they are managed.

Certain life insurance policies may be placed into trust where appropriate.

Why might someone put life insurance in trust?

Depending on the circumstances, a trust may help ensure policy proceeds are directed to the intended beneficiaries and may affect how quickly funds can be accessed.

Trusts also have legal and potentially tax implications.

Is a trust suitable for everyone?

Not necessarily.

Trust arrangements need to reflect your circumstances and intentions.

Where necessary, appropriate legal or tax advice should be obtained.

Business Protection

What is business protection?

Business protection is a broad term covering insurance arrangements designed to help protect a business against the financial consequences of death or serious illness affecting important people within the business.

This can include key person cover, shareholder protection, business loan protection and certain policies designed for directors and employees.

Why does a business need protection?

Many businesses depend heavily on a small number of people.

If a key individual dies or becomes seriously ill, the business may experience lost revenue, disruption, recruitment costs, problems servicing borrowing or difficulties involving company ownership.

Business protection can help address some of these risks.

Key Person Insurance

What is key person insurance?

Key person insurance is protection arranged by a business against the financial impact of losing an important person through death or, where included, specified serious illness.

The business is normally the policy owner and intended recipient of the benefit, subject to the policy structure.

Who is considered a key person?

A key person could be a director, salesperson, technical specialist, founder or another individual whose contribution is particularly important to the financial success of the business.

It isn't necessarily the most senior person in the company.

How much key person cover does a business need?

There isn't one standard calculation.

The amount may be influenced by the person's contribution to profits, cost of replacement, potential loss of revenue and the financial impact their absence could have on the business.

Shareholder Protection

What is shareholder protection?

Shareholder protection is designed to help business owners plan for what may happen to shares if a shareholder dies or, depending on the arrangement, becomes critically ill.

It can provide funding that may help the remaining shareholders purchase the affected person's shares, subject to the structure and agreements in place.

Why is shareholder protection important?

Without planning, shares may pass according to the deceased shareholder's estate arrangements.

The remaining business owners may want to retain control of the company, while the deceased shareholder's family may prefer to receive financial value rather than become involved in the business.

A properly structured arrangement can help address these competing needs.

Is insurance alone enough for shareholder protection?

Not necessarily.

The insurance policy and the legal arrangements concerning the shares need to work together.

Appropriate legal advice can therefore be important when establishing shareholder protection.

Business Loan Protection

What is business loan protection?

Business loan protection is designed to provide funds that can help a business repay specified borrowing if an insured person dies or, where included, suffers a covered critical illness.

What business borrowing can be protected?

Depending on the policy and circumstances, protection may be considered in relation to commercial loans, director's loans or other business borrowing.

The appropriate cover depends on the liability and people whose death or illness could affect repayment.

Does a business loan disappear if a director dies?

Not automatically.

The business can remain responsible for its debts.

Where borrowing depends heavily on a particular person or personal guarantee, their death could create additional financial pressure.

Relevant Life Insurance

What is Relevant Life Insurance?

Relevant Life Insurance is a type of life cover that may be arranged by an employer for an eligible employee, including certain company directors.

It is structured differently from an ordinary personal life insurance policy.

Is Relevant Life Insurance only for company directors?

No.

It may potentially be available for eligible employees as well as certain directors, subject to the relevant requirements.

Is Relevant Life Insurance automatically tax-efficient?

Relevant Life arrangements can have particular tax treatment where the relevant conditions are satisfied.

However, tax treatment depends on individual circumstances and legislation and may change.

Appropriate tax advice should be obtained where necessary.

Executive Income Protection

What is Executive Income Protection?

Executive Income Protection is designed for a company to insure an eligible employee or director against loss of income caused by illness or injury, subject to the policy conditions.

The company normally owns and pays for the policy.

How is Executive Income Protection different from personal income protection?

The ownership, premium payments and benefit structure can differ.

Executive Income Protection is arranged through the business, while personal income protection is normally arranged personally.

The tax treatment and appropriate structure should be considered carefully.

Private Medical Insurance

What is Private Medical Insurance?

Private Medical Insurance, often shortened to PMI, is designed to help cover eligible private medical treatment subject to the policy terms.

It is different from life insurance, critical illness cover and income protection.

Does Private Medical Insurance replace the NHS?

No.

Private Medical Insurance provides access to eligible private treatment according to the policy terms.

The NHS remains available.

Does PMI cover every medical condition?

No.

Policies have terms, exclusions and eligibility requirements.

Pre-existing medical conditions and certain types of treatment may be excluded or treated differently depending on the policy and underwriting method.

Is PMI the same as critical illness insurance?

No.

Private Medical Insurance helps with eligible treatment costs.

Critical illness insurance is designed to provide a financial benefit following diagnosis of a specified condition where the policy definition is met.

Buildings & Contents Insurance

What is buildings insurance?

Buildings insurance is designed to cover the physical structure of a property against specified insured events.

This can include elements such as the walls, roof and permanent fixtures, subject to the policy terms.

What is contents insurance?

Contents insurance is designed to protect eligible belongings within your home against specified insured events.

The precise cover depends on the policy.

Do I need buildings insurance with a mortgage?

Mortgage lenders generally require the property securing their mortgage to have appropriate buildings insurance where applicable.

Your solicitor and mortgage lender can confirm the requirements for your particular purchase.

When should buildings insurance start when buying a home?

The appropriate start date can depend on the transaction and legal arrangements.

Your solicitor or conveyancer should confirm when responsibility for insuring the property passes to you.

Is buildings insurance the same as mortgage protection?

No.

Buildings insurance protects the physical property against specified risks.

Mortgage-related personal protection, such as life insurance or income protection, addresses different financial risks.

Landlord Insurance

Is normal home insurance suitable for a Buy to Let property?

Not necessarily.

A property occupied by tenants presents different risks from an owner-occupied home.

Landlords should ensure their insurer knows how the property is being used and that the policy is appropriate for the rental arrangement.

What can landlord insurance cover?

Depending on the policy, landlord insurance may include buildings cover and potentially additional options relevant to rental property.

Cover, exclusions and optional benefits vary between insurers.

Does having landlord insurance guarantee my rent?

No.

Rental income protection or rent guarantee cover, where available, is separate and subject to its own conditions.

The policy wording should be checked carefully.

Making a Protection Claim

How do I make a protection insurance claim?

The insurer should be contacted as soon as reasonably possible when an event occurs that may result in a claim.

The insurer will explain the evidence and information required.

Does having a policy guarantee a claim will be paid?

No insurance policy guarantees that every claim will be successful.

A claim must meet the policy terms and relevant definitions.

Providing accurate information when applying and understanding what the policy covers are therefore important.

Can insurers refuse a claim?

A claim may not be payable if it doesn't meet the policy definition, falls within an exclusion or there are other relevant issues under the policy terms.

This is why policy wording and accurate disclosure at application stage matter.

Reviewing Your Protection

How often should I review my protection?

Protection can be worth reviewing when your circumstances change rather than simply arranging a policy and forgetting about it.

Significant changes could include:

• Buying or moving home

• Increasing or reducing a mortgage

• Having children

• Marriage or separation

• Changing employment

• Becoming self-employed

• Starting or growing a business

• Taking significant business borrowing

Does my protection automatically change when my mortgage changes?

Not necessarily.

If your mortgage or circumstances change, your existing protection may no longer match your needs.

The policy should be reviewed rather than assuming it automatically adjusts.

Should I cancel protection when my mortgage is repaid?

Not automatically.

If the original purpose of the policy was solely to protect the mortgage, your needs may have changed.

However, you may still have dependants, income requirements or other financial objectives.

The existing policy should be reviewed before making a decision.

Using a Protection Adviser

Why use an adviser for protection insurance?

Protection involves more than comparing monthly premiums.

The type of policy, amount of cover, term, deferred period, definitions, exclusions, underwriting and existing benefits can all affect whether a policy is appropriate.

An adviser can help identify the financial risks you want to address and consider suitable ways of protecting against them.

Can Cambs Ely Mortgages review protection I already have?

Yes.

Understanding existing policies can be an important part of the advice process.

The objective isn't automatically to replace existing cover. It is to understand what you already have, whether it still meets your needs and whether there are any gaps.

Do I have to take protection when arranging a mortgage?

No.

Mortgage and protection advice can be considered together, but protection is a separate decision.

The purpose of discussing protection is to help you understand the financial risks and available options so you can make an informed decision.

Have More Protection Questions?

Protection is rarely about choosing a single policy in isolation.

Life insurance, critical illness cover and income protection address different financial risks, while business owners may also need to consider what would happen to their company if a key person, shareholder or director died or became seriously ill.

Our Protection & Insurance Guides explore these subjects in greater detail, including life insurance, critical illness cover, income protection, first-time buyer protection, self-employed protection, key person insurance, shareholder protection, business loan protection, Relevant Life Insurance, Executive Income Protection, Private Medical Insurance and general insurance.

Our Educational Videos also provide straightforward explanations of protection, mortgages and insurance topics.

Thinking About Your Protection?

A useful starting point is not asking which insurance policy you should buy.

Instead, consider what would happen financially if your income stopped, you were diagnosed with a serious illness or you died.

Who would be affected? Which bills would continue? What existing savings or employer benefits are available? How long could your household or business manage?

Once those questions are understood, the different protection options can be considered in context.

Cambs Ely Mortgages is based in Cambridgeshire and helps individuals, families, homeowners, renters, self-employed clients and business owners in Ely, Cambridge, Cambridgeshire, East Anglia and throughout England through convenient remote appointments.

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Information on this page is for general guidance and does not constitute personalised insurance, mortgage, tax, legal, accounting or financial advice. Protection and insurance policies are subject to insurer terms, conditions, exclusions and underwriting. Eligibility, premiums and the cover available depend on individual circumstances. Tax treatment depends on individual circumstances and may change. Appropriate legal, accounting or tax advice should be obtained where required.

Your home may be repossessed if you do not keep up repayments on your mortgage.