Last year, the income protection provider Cirencester Friendly found that UK workers are twice as likely to insure their pets as they are to take out income protection
Meanwhile, the Guardian reports that unemployment benefit claims in the UK increased by nearly 70% last month, as a result of the coronavirus pandemic. That’s over two million people.
What would happen if your income unexpectedly stopped?
The scale of the Covid-19 crisis is unprecedented in our lifetimes and the government response – the introduction of the Coronavirus Job Retention Scheme, Covid-19 mortgage payment holidays, and help for small businesses – has been similarly large in scope.
It might have got you thinking about your finances, and about what would happen if you became ill or your income ceased. Maybe you’re now thinking about building some form of protection into your long-term plan?
Yet, financial protection products are often overlooked – deemed unnecessary or unsuitable.
From income protection to critical illness cover and life insurance, what types of financial protection are available? How do they fit into your plan? And how can Globe IFA help?
Protection and your financial plan
A report last year by Royal London confirmed that the decision to explore financial protection products is normally made at a life milestone, with ‘buying a house or starting a family recognised as the biggest triggers for taking out protection, followed by a salary increase.’
The report confirms that these milestones are tending to occur later in life than previously. But planning for the unexpected is important, whatever your age, and whether the trigger is an increased salary or a global pandemic.
Although no one likes to dwell on the possibility of being involved in an accident, becoming ill, or worse, it’s important to understand how your family would cope financially.
Rather than being looked at in isolation, protection products should be seen as an important part of your long-term financial plan.
You’ll no doubt have an emergency fund in place. Use protection alongside side this to cover yourself against the unforeseeable, building different forms of protection, possibly used in conjunction, into your plan.
What types of financial protection are there?
There are three main types of financial protection policy, designed to pay out in different ways, and under different circumstances.
The main types of protection product are:
1. Income protection
An income protection policy pays out when you are no longer able to work through accident or illness. Once a prearranged deferred period has elapsed, it will pay out a portion of your salary regularly, until either the end of the policy term, you return to work, or you retire.
The regular payments are designed to keep you financially afloat when you are not in receipt of your usual salary.
2. Critical illness
Critical illness cover will pay out a lump sum if you are diagnosed with certain conditions, as listed on your policy. Critical illnesses might include a stroke, heart attack, certain cancers, and conditions such as multiple sclerosis.
The diagnosis of a critical illness will undoubtedly be stressful and worrying, but knowing that you have the money for treatment, home adaptations or just to pay the bills will give you enormous peace of mind.
At Globe IFA, we pride ourselves on our thoroughness when getting to know our customers and previously detailed how we have secured large Critical Illness Cover payouts for our clients here. We provide another example later in this article.
3. Life insurance
A life insurance policy pays out a lump sum on your death, giving you the peace of mind that your loved ones will be financially secure should something happen to you.
The lump sum could help pay off the family mortgage or be used for ongoing school fees.
Speak to us if you think you’d like to take out a financial protection product and we can discuss the right one for you. Get in touch too if you think you might already have a policy in place.
We could help claim on your behalf as we recently did for one Globe client.
Client referral leads to £82,000 payout
A 54-year-old lady was referred to Globe IFA by her brother who had only recently become a client of ours.
Our client asked us to contact his sister as she was going through a very painful divorce and wanted to purchase her ex-husband’s half of the family home.
During the fact-find, the lady provided details of the life plan the couple had taken out to protect the mortgage, which had a critical illness cover element attached. The plan was due to expire in 2023.
The lady told Globe that she had had a heart attack seven years ago but never thought to claim. We confirmed to her that a claim was still likely to be successful, despite the elapsed time, and made the claim on her behalf.
The claim was successful and paid out £82,500. She had been paying all the premiums since her husband left so she became the sole recipient of the funds and plans to use the money to purchase her ex-husband’s half of the house, with the remaining amount going on refurbishments to the property.
She has a daughter aged 19 and a son of 21 and is now able to better look after them both financially.
Previously unaware that she was able to claim, it was only through a chance referral and our thorough fact-finding exercises here at Globe that we were able to help the lady receive the significant and life-changing sum.
Get in touch
It always pays to plan for the unexpected and a protection product could give you peace of mind and money to fall back on should an accident or illness prevent you from working. A life insurance policy will reassure you that your whole family will be financially secure in the event of your death.
If you’d like to discuss your long-term financial plan, get in touch. Please email hello@globeifa.co.uk or call 020 8891 0711.
