When you think about your financial future you probably primarily focus on your savings and investments. It can be easy to forget to consider the need to protect your assets and income from unexpected events.
Yet, if you want to reach your financial goals and grow your wealth, it’s equally important to make sure that your plans aren't derailed by unforeseen circumstances.
The right protection could help improve your financial resilience
While it's impossible to be prepared for the potential emotional stress caused when faced with the unexpected, there are several steps you could take to help your finances be more resilient to shocks.
With a wide range of financial protection available to protect you and your family, having the right insurance in place could help reduce at least some of the stress you might experience when faced with the unexpected.
Read on to find out three occasions when financial protection could play a crucial part in safeguarding your financial plan.
1. You may become too ill to work
Like most people, your home, belongings, and lifestyle probably rely on your regular income.
If you are injured, diagnosed with a disability, or experience another life-altering event that prevents you from being able to work, you may struggle to afford the lifestyle you and your loved ones previously enjoyed.
Instead of having to access your savings and investments to help you through a period when you are unable to work, income protection insurance could provide a helpful financial cushion.
An appropriate level of income protection could provide a steady income while you are unable to work, allowing you to support yourself and others without adding stress to your situation.
If the unexpected were to occur, this type of cover could be the difference between having to sell your home and having your assets protected.
2. You might be diagnosed with a critical illness
Millions of people around the world are diagnosed with acritical illness every year.
Such illnesses can often lead to difficult life changes and upheaval. Being diagnosed with a critical illness is highly likely to place significant pressure on your emotional wellbeing and your finances. You may find it necessary to take time away from work or retire earlier than planned.
One particularly sad story has been shared by British TV presenter Jonnie Irwin. Late in 2022, he was incredibly open about his mistake in failing to take out critical illness cover alongside his life insurance policy.
Diagnosed with terminal cancer in 2022, Irwin has been candid about his oversight. Sharing his story on ITV’s This Morning, he told presenters that his mistake had “put a lot of pressure on me, having to work on days when I didn’t want to”.
Critical illness cover provides a tax-free lump sum if you’re diagnosed with serious illnesses that the policy covers. While policies differ, most critical illness policies cover heart attacks, strokes, cancer, and multiple sclerosis.
It’s important to take care when choosing which cover to buy, as not all policies are the same.
We can work with you to determine which policy might be suitable for you and help you avoid paying expensive premiums on insurance that isn’t what you expected.
The money from a claim can be spent however you wish. For example, you could use it to help:
- Pay medical bills
- Adapt your home
- Clear large debts such as a mortgage
- Provide an income if you’re unable to work for an extended period.
3. You could die unexpectedly
One of the many sad yet valuable lessons the Covid pandemic taught us is that even healthy young people can pass away from unexpected illnesses or accidents.
While it’s unpleasant to dwell on, have you paused to consider how your family would manage financially if you passed away earlier than you might hope?
If you are the main breadwinner, would your family be able to maintain their current lifestyle if you were no longer around to contribute?
With life insurance in place, your family could receive a payout in the event of your death, providing money that they could use to:
- Pay the mortgage, allowing them to remain in the family home and reduce potential disruption of having to uproot their lives
- Cover living costs such as school fees, travel, and day-to-day expenditure
- Cushion the blow of an Inheritance Tax (IHT) bill.
Family income benefit may offer an appropriate alternative to traditional life insurance
Instead of paying out a lump sum, family income benefit (FIB) pays out a regular monthly benefit from the point of a claim to the end of the policy term.
The guaranteed income could give your family reassurance that they have the means to meet monthly mortgage repayments, cover household bills, school fees, or other living expenses that may be a struggle if circumstances were different.
As such, this type of life insurance policy may be particularly useful if you have young children.
Because payment is made in monthly instalments, FIB can also reduce the stress that can come with having to manage a large cash influx at a time of emotional distress.
To find out more about which type and level of life insurance might be appropriate for your circumstances, please get in touch.
A financial planner can help provide valuable reassurance that you have the right cover in place
While it's impossible to know what the future has in store, having the right financial protection in place could mean that money worries are one less thing to deal with should something unexpected happen.
Yet with so many financial protection options available, it can be hard to know what might be suitable for you.
A conversation with your financial planner can help you to better understand all the choices and how they fit in with both your family and financial circumstances. A professional expert can provide useful knowledge and insight into the kind of cover that might be suitable for your family, your age, and your portfolio of assets.
Get in touch
If you have questions about financial protection and want to learn about the available options, please get in touch.
Email enquiries@alexanderpeter.com or give us a call on +44 1689 493455.
Please note
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
Note that financial protection 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. Cover is subject to terms and conditions and may have exclusions.
