There are various events in life that we all face, such as serious illness, an accident or death. What would happen if something were to happen to you? Would your family be able to cope financially with the impact an unexpected event might have?

These are not easy questions to ask but it is important to consider what would happen if an unexpected event or accident took place, and how you could protect your family from the financial effects of serious illness or death.

Big part in our lives

Deciding what your priorities are and understanding what options you have are key parts of the protection planning process. This helps you ensure that you have the financial protection most suitable for your circumstances.

Protection for the unexpected

Life insurance

The amount of life insurance you need will depend on your individual circumstances. There are many good reasons to take out a policy, and perhaps one of the main reasons is if you have dependents. In this circumstance then life insurance may provide financial security for them in the event of your death.

There are different types of life insurance available, so it’s important to choose the right policy for your circumstances. Term life insurance provides cover for a set period of time, while whole of life insurance covers you for your entire life. You can also choose between level term insurance, which pays out a fixed amount if you die during the term of the policy, and decreasing term insurance, which pays out less as the policy progresses.

There is also a variation on the basic term assurance theme that is often worth considering as it can reduce the cost of cover. Family Income Benefit is a policy with a sum assured that reduces uniformly over time but can provide regular payments of capital on the death of the breadwinner (the life assured).

If you have any debt, you may want to consider taking out life insurance to allow it to be paid off in the event of your death. Life insurance not only provides peace of mind to you and your loved ones but is an essential part of creating a sound financial plan.

Income protection insurance

There are a number of reasons why income protection insurance should be a part of your protection planning. Firstly, it can help to protect your income if you are unable to work. This could be due to an illness, injury or disability that means you are unable to work. It can help to cover the costs of your everyday living, such as your mortgage or rent, bills and food.

If you do not have sufficient protection in place this may mean you have to rely on your savings, or on the help of family and friends. Income protection insurance is especially important if you are self-employed or have a family to support. If you are unable to work, your income protection policy can provide you with a replacement income so that you can continue to meet your financial obligations.

There are different types of income protection insurance policies available, so it’s important you compare the different options and fully understand the terms and conditions of the policy.

Self-employed people are at risk of financial hardship if they don’t have sufficient provision in place. Without a regular income, it can be difficult to cover expenses and also save for the future. In many cases, the self-employed are unable to claim for many of the benefits that employees are entitled to, including statutory sick pay.

Being self-employed also means you don’t have the luxury of having an employer to rely on for sickness cover or health insurance, which can make you extremely vulnerable to loss of income or unexpected financial shocks.

If you’re self-employed, it’s essential you’re prepared as you can be for unexpected life events by having the right protection in place. Being self-employed can offer numerous benefits, such as flexible hours and the opportunity to work with a wide range of people, but self-employed workers can also face financial vulnerability.

Critical illness cover

Having critical illness cover in place provides peace of mind, knowing you and your family are financially protected if the worst were to happen. It can provide a tax-free lump sum payment should you be diagnosed with a specified critical illness or become seriously ill. This money could be used for any purpose; from paying for treatment, making lifestyle or home adaptations, providing an income for your family if you are unable to work or covering other costs associated with your illness.

There is no guarantee that you will not experience a critical illness during your lifetime, so it’s important to have this type of cover in place. It will give you the peace of mind of knowing that you and your family are financially protected if the worst were to happen. Critical illness cover is not a substitute for health insurance.

When considering financial advice regarding critical illness cover, it is important to ask yourself whether you would have enough savings to cope financially if you were affected by a serious condition, as well as how much cover would be suitable for your individual needs. This will all depend on your individual circumstances.

Life is unpredictable. Are you prepared for the unexpected?

Unexpected events such as bereavement or a critical illness are upsetting subjects to think about, but there’s no getting away from the fact they do happen. Life is unpredictable, and even the savviest of savers could find their plans are thwarted by events outside their control. Protection can offer a financial lifeline in the event of death or illness.

Please note: This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

The content was accurate at the time of writing. Whilst information is considered to be true and correct at the date of publication, changes in circumstances, regulation, and legislation after the time of publication may impact on the accuracy of the article.

FP2023-108