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Latest advice from MPFS
Life insurance companies have 2 distinct legs (or should that be claws?). They clearly exist to provide you with protection against certain risks – death and sickness. But they also issue savings contracts and lump sum investments – and usually major on these.
Nowadays, the tendency is to avoid “bundling” savings and protection into one policy – giving more power and choice to the customer. But there will usually be a small level of protection included with savings contracts in order for the policy to qualify as a life insurance contract.
As a Friendly Society, MPFS is just a mutual life insurance company (owned by its members) and is regulated as such by the FSA. But we are able to offer tax concessions on some of our savings contracts that are unique to Friendly Societies.
Protection policies come in many shapes and sizes. At one extreme, you could end up buying cover to protect you against death and sickness (and possibly redundancy) when you take a loan to buy a car or even, say, a washing machine. At least 50% of what you pay goes straight to the retailer! You do NOT have to accept this insurance.
But other types of cover are more worthwhile. You need to recognise first what help you can get through the Job; and then consider what responsibilities you have for your partner and dependants.
The Job is good at providing a basic level of life insurance through the pension scheme. Most officers opt to top this up through the Federation’s Group Scheme which is very good value. But when you buy a house, it makes sense to insure the amount of your mortgage, not only on your own life but also on your partner’s. Even if you do not have any dependants now, you may in future – in the meantime, the cost of life insurance creeps up and you may not always qualify for the best available rates.
The Job also provides a certain level of Income Protection – you have 6 months on full pay if you are off work through sickness or accident. You can choose to cover yourself beyond this period when you could be reduced to half pay, then no pay and/or medical retirement. (Our policy covers you right throughout your service and includes medical retirement.)
Another risk from sickness is medical costs. You can generally rely on the NHS to provide, but not necessarily as quickly as you would like. Some employers provide private medical cover, but not usually those in the public sector. You can choose to cover yourself (and your family) through a personal insurance policy. (Ours is a long term policy, again throughout service – most, however, are annually renewable.)
Life insurance, and especially Income Protection, meets a real need. Unfortunately, without massive commissions at stake, you need to take control of your own destiny. Work out what gaps you need to plug, and then …. do something!
You can visit the MPFS website by visiting
www.mpfs.org.uk
