A key part of any long-term financial plan is protection against the unexpected. You can’t predict when huge life events or accidents will strike, but you can guard against these shocks.
Financial protection can help cover lost income after an accident, help toward treatment costs for a critical illness, or ensure that your family are protected should the worst happen to you.
And yet many Brits still don’t have protection in place. In fact, Unbiased reveals that less than 40% of UK adults have life cover. Even if you are covered, it’s still worth revisiting your plans regularly to ensure that the provision matches your and your loved ones’ needs.
With that in mind, here are three vital forms of financial cover, and why it might be prudent to revisit your provision now.
1. Income protection provides a regular income if you can no longer work
If you sustain a sudden injury or become seriously ill, you might be unable to work for an extended period. But would you and your loved ones be able to maintain your current standard of living during this difficult time?
If lost income would leave your family struggling to make ends meet, then income protection could be invaluable.
This form of protection pays you a monthly sum until you can return to work, or until the end of your protection period.
The amount you receive typically depends on your salary, and it usually pays out after an “excess period” – the time you need to be off work before the protection kicks in. Typically, the longer the excess period, the cheaper the overall cost of cover. But other factors influence costs too, like:
- Your age and medical history
- The risks involved with the work you do
- The level of cover you want.
It’s important to note that income protection plans might not cover every illness and you may not be covered for pre-existing conditions. It’s vital to check the terms of your policy to verify what you’re protected against.
If the unexpected strikes and you’re unable to work, income protection could help you pay for any essential financial commitments, such as your mortgage and regular bills. This allows you to focus on your recovery rather than worrying about your financial situation.
2. Critical illness cover supplies a lump sum if you’re diagnosed with a serious illness
The prospect of being diagnosed with a critical illness isn’t something that any of us want to dwell on. But it can happen to any of us, at any time.
Macmillan Cancer Support reveals that around 393,000 people in the UK are diagnosed with cancer each year – an average of one person every 90 seconds.
A severe diagnosis can be devastating for your physical and mental health and also for your and your family’s financial wellbeing.
Critical illness cover can supply financial support by providing a lump sum if you’re diagnosed with, or need treatment for, certain serious illnesses. These are likely to include some cancers, heart attacks, strokes, and other conditions like multiple sclerosis.
Your provider typically provides a list of illnesses the protection covers, so be sure you know what you are covered for.
You can then use the lump sum you receive to help towards mortgage payments or to pay for house modifications, for example, if your condition requires these. This can give you much-needed peace of mind at a difficult time, knowing that you are financially resilient enough to deal with the sudden shock.
3. Life cover gives your family financial support should the worst happen
Thinking about your own mortality, or that of a loved one, can be difficult. However, this doesn’t make it any less necessary to prepare for the worst, especially if you have financial dependents.
Life cover can provide your family with a lump sum or regular income in the event of your death, giving you peace of mind that they’ll be financially supported should the worst happen.
With different types of life cover available, it’s worth checking your current provision to ensure you’re adequately protected.
You might opt for term assurance, which pays out if you die within a given time frame. You might use this to ensure that you and your partner can pay off a mortgage if the other passes away. It’s even possible to decrease the sum assured over time, aligning this to your decreasing mortgage debt. Whole of life cover, on the other hand, will pay out whenever you die. This will usually make a whole of life plan more expensive.
If your cover is attached to your employment, this might cease when you change jobs. Equally, you could have a term assurance plan but that has now expired. Be sure to check your provision regularly to ensure that you and your loved ones still have all the cover you need.
Get in touch
Please email hello@globeifa.co.uk or call us on 020 8891 0711 to discuss how Globe IFA’s expert financial advisors can help you revisit your protection needs to ensure you and your family are prepared for any eventuality.
Please note
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. Definitions of illnesses vary from product provider and will be explained within the policy documentation.
