When you think about your financial future and plans, the first things that probably springs to mind are pensions, swiftly followed by savings and investments. But it’s also important to protect yourself and your family from unexpected events.
If you want to reach your financial goals and grow your wealth through careful saving and investment, it’s important to make sure nothing unexpected derails those plans.
The right protection can help prepare your wealth to handle an unexpected blow
While you may not always be prepared to handle the emotional stress unexpected events may bring, you can prepare your wealth to take a blow, should one occur.
Financial protection covers a range of insurance policies that pay out under certain circumstances. The primary aim of this type of insurance is to provide financial security and peace of mind.
Here are three types of risk you and your family could encounter and the financial protection options that could help safeguard your wealth and future plans.
1. Income protection could help cover your bills if you’re unable to work
It’s all too easy to shrug and say, “It won’t happen to me,” but the number of working-age adults who are unable to work because of long-term sickness is on the rise.
According to the Office for National Statistics (ONS), in spring 2019, around 2 million working age people were classed as “economically inactive”. By summer 2022, this number had risen to 2.5 million.
The chart below shows a startling illustration of the speed of the rise and highlights the cumulative change in number of people aged 16 to 64 years who are inactive due too long-term sickness.
Source: Office for National Statistics. Please note: Chart is seasonally adjusted and covers January to March 2017 to June to August 2022.
If you were in the unfortunate position of being unable to work for an extended period of time, you might struggle to meet your everyday expenses.
Even if you were receiving Statutory Sick Pay (SSP), paid at £99.35 a week in 2022/23, this may not be enough to cover your usual expenses and could force you (and your family) to adapt your lifestyle while you recover.
Self-employed workers aren’t eligible for SSP, so being out of work could devastate your immediate and long-term financial situation.
Income protection could save you from such stress. A policy will make regular monthly payments, which will usually continue until you’re able to go back to work or retire.
Typically, this type of protection will pay out a percentage of your usual salary and can be used to help you meet financial commitments if you become ill or involved in an accident.
Equally important, an income protection plan could give you access to rehabilitation services that might help you return to work sooner.
2. Critical illness cover could provide for your family and pay expensive medical bills
Critical illness cover provides a lump sum if you’re diagnosed with serious illnesses that the policy covers. Not all policies are the same and it’s vital to make sure you read the small print to ensure you’re paying for the cover you want.
We can help you understand which policy might be right for you and assist you in avoiding paying expensive premiums on insurance that isn’t what you expected.
Critical illnesses that are often covered include:
- Heart attack
- Stroke
- Cancer
- Multiple sclerosis
If you were diagnosed with an illness or experienced a stroke or heart attack, critical illness cover would provide a lump sum payment. You could use the money to help you adjust to the diagnosis and give you some time to come to terms with it.
Protecting yourself against the potential for unexpected healthcare expenses could be essential to preserving your financial wellbeing.
Watch this video to hear a first-hand account of how critical illness cover helped one of our lovely clients when she needed it most, and how she heard the best news on Christmas Eve.
3. Life insurance could protect your family from financial ruin
The Covid pandemic taught us that even healthy young people can pass away from unexpected illnesses or accidents.
It may be uncomfortable to consider, but have you paused to think about how your family would maintain their current lifestyle if you were to pass away in the near future?
With a life insurance policy in place, your family could receive a payout in the event of your death.
The money could help them to:
- Continue paying the mortgage on your home, meaning they may not have to uproot their lives if you passed away
- Cushion the blow of an Inheritance Tax bill
- Cover living costs such as school fees, travel, and day-to-day expenditure.
Despite the benefits life insurance can bring, FTAdviser report that many people reject life cover because they believe it’s “too expensive” and “unreliable”.
Yet, according to Unbiased, depending on the type of cover you choose and your individual circumstances, the average cost of life insurance in the UK is between £15 and £30 a month.
Your circumstances can help you understand which type of cover would be most suitable for you
While protection policies are designed to offer valuable peace of mind, your circumstances may mean you have greater need for one type of cover over another. For example, some employee benefit packages include life insurance, so it’s worth checking to see if this is something you already have through your work.
The type and level protection that is most suited to you will also depend on your circumstances.
By taking a holistic view of your financial situation and family needs, we can help you decide what would provide you and your family with the most benefit and help you understand which policy might be right for you.
Get in touch
If you’re interested to learn more about financial protection and want to understand more about the available options, please get in touch. Email contactme@kbafinancial.com or call us on 01942 889 883.
Please note
Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.
