Claire, 27, works full-time as a freelance illustrator. Her average annual earnings amount to £18,000, although her monthly income varies throughout the year. She has savings, which also fluctuate between £4,000 and £6,000, as she sometimes has to dip into them when her earnings are down. Claire has recently bought a flat in Sheffield and has an outstanding mortgage of £75,000. She would like to buy some form of income protection - what options are available to her?
Tony Clements, IFA at Millfield Partnership Limited We would first need to calculate Claire's monthly expenditure, including her mortgage, and then set the level of cover accordingly. Claire has a choice of income protection (IP), mortgage payment protection insurance (MPPI) and critical illness (CI) cover, or a combination of all three. It would be advisable to use a CI policy alongside IP because she may contract a serious illness but still be able to continue working, and therefore would not qualify under the IP conditions. A combination of IP and CI cover would therefore be the opti...
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