In a sophisticated and advanced country such as the UK it comes as somewhat of a surprise to see that a survey conducted by one of the country's major insurers says that 'Just 7% of UK families feel completely financially protected'.

The Family Finances Report by Aviva (of the advertisements by that talented Paul Whitehouse character) also shows that 61% of families have no life insurance and 87% do not have any Critical Illness Cover (CIC).


It will not come as a shock though to learn that the most vulnerable of families, the single parent variety, are least likely to have any protection and also feel the most vulnerable.

What makes this surprising though is that 25% of families attest to experiencing what it is like when the main bread winner dies, is ill or becomes unemployed. It would be logical to assume that these people at least would have taken steps to protect themselves. Especially as 33% of families have no savings and 40% say they save nothing every month.

Now, when the financial services industry talks about 'protection' what they really mean is some form of life, illness or unemployment insurance. The finance sector has taken a drubbing in the 'trust' stakes with the public over the last couple of years and whenever insurance companies feature in the press it's to highlight a refusal to pay out.

But they do pay out and when the money gets to the family in need a great weight of worry is lifted. As one broker told me "I've never met a widow who thought her husband was over-insured". Many people believe they cannot afford insurance, but when the worst happens wished they had chosen a smaller car or TV or fewer nights out so they could have the cover. Arrange to see an IFA or broker and it may not be as expensive as you think.

To put it in context Aviva claim they paid out in 99% of life insurance claims. And the table here shows a break down of CIC claims in 2009 where claims declined were on average 9.5% and usually due to either the illness not meeting the definition or were not properly disclosed prior to taking out the policy. Insurance companies have to stick to the illness definitions and the person taking out the policy must tell the truth about their medical condition (it's called disclosure).

There are many providers out there and each one has a different offering. Some place exclusions on paying out on death some don't, some have more illnesses covered than others. Some policies last a year, some the duration of the mortgage, some until the children are 18 years old, some until you retire and even some that pay out when you die however old you are. It's a confusing market place for many. Many families for example don't know about one of the cheaper forms of life insurance called Family Income Benefit (FIB), which can be a very cost effective type of insurance in the right circumstances.

Now you would think that price would be a guide, but no. In many cases when you get insurance from your lender with your mortgage for example you are paying more than if you went to a broker.

Many people are tempted to go to the internet for the cheapest quote believing life insurance is life insurance. But would you be prepared pay a quid or two more a month for cover with no exclusions?

To get a good policy you should talk to a properly qualified and authorised expert who can ask you the right questions, identify the best policy from the best company that suits your needs then take you through the policy properly. The most important thing to realise is that, just like cars, houses, TVs and Hi-Fis, cheapest is not always best.

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