As we settle into our new reality, most of us are reflecting on the unprecedented COVID-19 situation to recalibrate and rethink our spending habits, all the while considering our priorities and how we can protect against the future unknowns.

Health and wealth are key considerations both in the short- and long-term when considering a range of potential life events.

Throughout 2020, we have seen consumer behaviour changing radically and rapidly in a way that no one could have imagined.

There is evidently an increased awareness of life risks and changes in demand patterns for various products and services, including life protection cover. There is also a deeper understanding that protection cover is an important investment, both in the short- and long-term.

People have become more interested in the detail of their insurance policies, and the cover provided and they are more carefully assessing how to address gaps, choosing products that truly meet their needs, and selecting products from trusted partners.

Life insurance can play a vital and valuable role at various phases in our lifetime. Traditionally, having children seemed to be the life event that would typically trigger people to think about their futures and consider whether their households are adequately protected.

This is still very much the case whereby parents with young children or households starting a family have the biggest need for protection.

Health and wealth are key considerations

As we get to grips with a different reality, we are coming to terms with the fact that life protection cover is not just for young households but also for parents or guardians of young children. Employees with limited access to employee benefits through their current employers for example, are another demographic that could experience a need for individual protection products. Something that has materially changed in a relatively short period of time is the increased need for the self-employed to protect income. This demographic relies on regular work and is unlikely to have the same level of protection provided as those individuals working for an employer who is providing benefits such as critical illness cover or death in service.

Life insurance comes in varied types, but the most popular are level term and decreasing insurance. In the case of a level term policy, the policy runs for a set term, say 10, 20 or 30 years, and the sum assured remains the same throughout the term of the policy.

On the other hand, a decreasing policy is similar to level term, but the payout gets gradually smaller over the policy term. The gradual reduction in sum assured is typically linked to a mortgage repayment schedule because the amount due also reduces over time.

Complementing the life insurance cover are ‘living benefits’ which protect life risks other than death. One of the most common living benefits is critical illness cover, which pays out the sum assured in the event the individual insured is diagnosed with a serious condition or illness.

Another important type of cover is the permanent total and partial disability benefit which pays out the sum assured in the event that the life assured suffers a permanent total or partial disability resulting from an accident or disease involving bodily injury.

The idea behind such additional insurance cover is to cater for possible life scenarios whereby the individual would no longer be in a position to earn income. As such, the life policy would pay out against such scenarios to provide financial relief in the form of the sum assured.

When assessing your life insurance needs, insurance companies and financial planning advisers can help decide which products are best suited for personal needs and circumstances. Advisers play an important role in helping customers from all walks of life to understand the need for and benefits of individual protection.

It takes careful planning to choose the right life protection cover. It is also important to review regularly life protection cover needs in order to make sure that they evolve with changing personal and economic circumstances.

Muriel Rutland, CEO at HSBC Life Assurance (Malta) Limited.