Ensuring financial security for you and your loved ones is essential, though it’s often uncomfortable to consider scenarios like illness or death that might prevent you from supporting your family. With the right financial protection in place, you can have peace of mind knowing your family’s needs will be met.

The Importance of Financial Security

If a family member becomes unable to work due to illness or premature death, it can severely impact your financial stability. This is especially true if you’ve left regular employment and no longer have employer-provided protections. Without adequate coverage, affording everyday expenses including essential, lifestyle or discretionary (as detailed below) could become challenging.

Covering Essential Costs

Start by ensuring that your debts and essential costs—such as mortgage payments, utilities, and food—are covered. Then, consider additional protection options. 

Some key types of protection include:

  • Healthcare Insurance
    UK residents are entitled to free healthcare from the NHS. However, some individuals also opt for private medical insurance. Also known as ‘PMI,’ it pays some or all of your medical bills if you’re treated privately. Basic policies typically cover the costs of most inpatient treatments, and more comprehensive policies extend their coverage to outpatient treatments.
  • Critical Illness Cover
    Critical illness cover typically pays a tax-free lump sum or regular payment upon diagnosis of a specified critical illness. A lump sum could help you to take time off, modify the house, pay for medical treatment, or give you time to recuperate or adjust to your new condition. You can also build in children’s cover – a lump sum payout if they are diagnosed with a critical illness could allow you to take unpaid leave to care for them.
  • Income Protection
    Income protection pays out a regular income to replace income you’ve lost through being unable to work due to sickness or disability. You can choose to take cover for a set period of time – for example, one to three years or usually until age 65 – and delay the start of payments for a number of months, both of which can help keep premiums down. You can also choose your level of cover – usually somewhere between half and two-thirds of your income.
  • Life Insurance
    Life insurance pays out on death and can provide a lump sum or regular monthly payments over a specified timeframe – say, until children reach a certain age. The payments can help pay off or cover a mortgage, pay for school fees and cover lost income.
Protecting Your Inheritance

Inheritance Tax (IHT) can impose a significant burden on your beneficiaries. Without proper planning, your family may need to sell assets to cover this tax. Setting up a Trust or effectively managing pensions can help protect your estate and ensure your loved ones receive their intended inheritance.

Strategic Planning and Professional Advice

Strategic financial planning, including Trusts and pension management, is essential to help mitigate any unnecessary IHT liabilities. Regularly review your plans to adapt to life changes and seek professional advice to navigate the complexities of estate planning, ensuring your legacy is preserved.

Find Out More

To discuss your protection options or find out more information about anything discussed in this article, please contact your financial adviser. You can also contact us directly on 0161 819 1311.

Personal circumstances differ and not all of this information is applicable to every client and/or their business, this information is general in nature and should not be relied upon without seeking specific professional financial advice.

The Financial Conduct Authority (FCA) does not regulate tax advice, estate planning, trusts or will writing.

The content in this article is for your general information and use only and is not intended to address your particular requirements. Articles should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice.

Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles.

Thresholds, percentage rates and tax legislation may change in subsequent finance acts. Levels and bases of, and reliefs from, taxation are subject to change and their value depends on the individual circumstances of the investor. The value of your investments can go down as well as up and you may get back less than you invested. Past performance is not a reliable indicator of future results.

Pareto Financial Planning Limited is authorised and regulated by the Financial Conduct Authority (FCA).