Protection
Do I need it?
What is Protection?
We insure our cars, homes and even mobile phones – so we should also consider insuring our full replacement value to ensure that our loved ones are financially catered for in the event of a premature death.
Financial protection refers to a range of insurance policies that pay out under certain circumstances. They aim to give you peace of mind and financial security in the event of unforeseen circumstances.
Protecting Your Family
Family protection can provide a safety net for those with dependants relying on you financially. It provides you with peace of mind that even without you, your dependents’ financial security is taken care of.
Some insurance premiums can cost around the same as a monthly streaming platform subscription, yet the studies by insurance company Swiss Re suggest that the Protection Gap in the UK is a staggering £2.4 trillion, with the average family just 32 days away from the breadline.
When
Life Events
There are particular events which could impact your finances and should prompt you to review your current position on protection, these may include:
- Buying your first home
- Covering loans
- Getting married or entering a registered civil partnership
- Starting a family
- Becoming a stay-at-home parent
- Having more children
- Moving to a bigger property
- Salary increases
- Changing your job
- Reaching retirement
- Relying on someone else to support you
Types
Types of Financial Protection
Life Insurance Cover pays out a lump sum if you pass away during the policy term. If you’re diagnosed with a terminal illness and are not expected to live longer than 12 months, some policies will provide the sum prior to death. It’s there to provide financial support for your loved ones after you’re gone.
Life insurance can help you to financially protect your family. It could pay out a cash sum if you die while covered by the policy. You choose the amount of life cover you need and how long you need it for, and you can pay your premiums monthly or annually.
Life insurance is designed to provide a safety net for your family and loved ones if you die, helping them cope financially during an otherwise very difficult time.
Whole-of-life insurance pays out a lump sum whenever you die and has no fixed term.
The policy is designed to provide you with cover throughout your entire lifetime providing the policyholder’s dependants with a lump sum. This may be tax-free.
Depending on the individual policy, policyholders may have to continue contributing right up until they die, or they may be able to stop paying once they reach a stated age, even though the cover continues until they die.
Income protection pays out a monthly replacement income if you are unable to work due to illness or disablement.
Income protection insurance pays a proportion of your salary, usually up to a maximum of 50% to 70%. However, because payouts are tax-free, there may not be much difference to your net monthly salary. Payouts typically continue until:
- You return to work
- Reach State Pension Age
- Die while claiming
Critical Illness Cover is a type of insurance that pays out a tax-free lump sum if someone is diagnosed with or undergoes surgery for a critical illness. It covers a range of serious conditions such as heart attacks, strokes, certain types of cancer and conditions such as Multiple Sclerosis (MS).
It’s designed to help support you and your family financially while you deal with your diagnosis. Allowing you to focus on your recovery without worrying about how the bills will be paid.
Pay-outs are commonly used to pay off the mortgage and other debts which you might not be able to afford if you cannot work.
Private Medical Insurance (PMI) can help you obtain medical treatment more quickly than would otherwise be the case through the NHS. It can therefore enable you to get back to work sooner. Particularly for the self-employed and business owners, this can be key to maintaining the income your family relies on.
Whether it’s overnight care, outpatient treatment, diagnostic tests, scans or aftercare, you receive the specialist private treatment you need, in comfortable surroundings, when you need it. There are a range of different levels of cover at various premiums designed to meet your specific needs.
Considerations
What to Think About
These are some variables to consider when you are looking at protection, including:
- What are your family expenses and how would they change if you died?
- How much would the family expenditure increase on requirements such as childcare if you were to die?
- How much would your family income drop if you were to die?
- How much cover do you receive from your employer or company pension scheme and for how long?
- What existing policies do you have already and how far do they go to meeting your needs?
- How long would your existing savings last?
- What state benefits are there that could provide extra support to meet your family’s needs?
- How would the return of inflation to the economy affect the amount of your cover over time?
Peace of mind
The Importance of Protection
As you reach different stages in your life, the need for protection may change. How much and which you need really depends on your circumstances – for example, whether you’ve got a mortgage, you’re single or have children.
Before you consider insurance, it’s worth bearing in mind that the amount of cover you need will very much depend on your own personal circumstances, such as the needs of your family and dependants.
The short video below highlights the importance of protecting your family:
Be prepared
In Case of Emergency File
Do your family members know where all your important documents and information are held? An In Case of Emergency (ICE) file is a place where someone can find all your important information should an emergency arise.
Our ICE file provides a template to help you record your financial and personal information clearly and easily in one place.
Download our ICE File
IMPORTANT NOTE
If you choose to complete this document, please ensure it is kept in a safe place. It will contain sensitive and confidential information. A locked filing cabinet, a safe or at your solicitor’s office may be best – please do not leave it in an insecure location.
DO NOT RECORD ANY PASSWORDS IN THIS DOCUMENT.
