Are You Prepared? Financial Protection Is Essential For You & Your Family
Life insurance and long-term financial protection are things people don’t particularly like to think about. We are often well into our careers before we even consider investing in such things because we might not necessarily feel like we need it.
However, what would life be like for you and your family if things didn’t quite go as expected? It is easy to get caught up in the comfort of job stability and a steady income, but what if something happened? Serious illnesses or accidental injuries can significantly impact the lives of the victim and their whole family.
If the breadwinner becomes unwell and needs to take prolonged time off of work or spend extended periods of time in hospital, they could be losing out on a huge sum of income that’s keeping that unit afloat.
While it is awful to think about, it is so hard to know what the financial impact of something like this would be for you. In the event of something life-changing occurring, financial protection could allow you and your family to continue living comfortably and without worry.
With this in mind, it is never too early to start thinking about what’s on offer. There are options for everyone out there and so having something in place now may alleviate some of the stress and worry along the way. Even if you never need it - you’ll be thankful it was there, just in case.
Why Might You Need Financial Protection?
Many families admit they would struggle to make ends meet if one of them passed away suddenly or became very ill. The most common reasons for someone relying on certain buffers are:
Cover repayments, debt or the basic living costs due to sudden illness or injury.
Covering inheritance tax without the need to sell or give up any possessions such as property.
Leave your family in a stable position should you die or become seriously unwell.
Without anything to cushion the blow, homelessness and substantial debt can be detrimental. We understand that finances can be a huge concern for many families. That is why we want to make more people aware of the possibilities of financial protection.
Income Protection
If you find yourself in a situation whereby you are unable to work, this cover will provide you and your family with regular payments in place of your income. Usually, this amount will be between 50% and 65% of your income and will cover most short or long-term illnesses. Of course, this will vary depending on the provider and type of cover you need.
You can claim this as many times as you need while the policy is in play and it will be paid out regularly until:
You can begin working again
You retire
The policy ends
You pass away
(Whichever one comes first.)
People who are self-employed or work for an employer that only provides statutory sick pay may benefit greatly from this form of financial protection. However, the majority of the working population is entitled to it and would receive significant support in the event of illness. Of course, restriction may apply according to company policies so it is worth researching or getting in touch with our team for more information.
Life Insurance
In the event of your death, a lump sum will be paid out - offering reassurance to dependants. This should definitely be considered by anyone with an outstanding mortgage or other loans. The amount of money paid out will depend on the level of cover you choose, but the options will allow you to decide how much you pay monthly in the meantime.
You get to decide how the sum is paid out and which finances it can be used to cover. For instance, it may benefit you to put a large percentage into the mortgage repayments or keep up with rent - reducing strain on your family. However, some people may prefer the amount to cover inheritance.
Term Policies
If you opt for this style of life insurance, your financial protection will cover you in the case of your death during the policy term. In other words, the provider will only payout if you die during the five, ten or 25-year policy length.
Level term policies are the most popular and affordable choice. They will ensure the level of cover you receive stays the same throughout.
Decreasing term policies are designed to be paid out in conjunction with mortgages or loans. The level of cover reduces each year.
Increasing term policies can be used to keep up with inflation. Your level of cover will increase steadily over the course of your policy.
Whole Policies
If you want something that covers you for the foreseeable future, whole of life providers will payout no matter when you die. This is often more expensive and does rely on you keeping up with premium payments. However, many people use it to plan for funeral costs or inheritance tax.
Many providers also allow you to invest part of the money from your premiums. As we like to remind people - investing always comes with risk. So think carefully before you decide to go down this route.
However, doing so could offer you a form of equity if the value increases. Should you need it, you could withdraw a tax-free amount from this which won’t affect your payout.
The main benefit of this type of life assurance is having that guarantee. You’ll never need to worry about buying a new policy or what the implications may be should the term end.
Critical Illness Cover
This can be taken out as a singular policy or as part of a life insurance deal. It is designed to offer you a tax-free lump sum on the diagnosis of certain conditions. This may include:
Heart attack
Stroke
Cancer
Multiple Sclerosis
This could be used to implement adapted living arrangements or cover medical costs due to the illness.
It is worth mentioning that different providers are likely to have significantly varied policies. This means they may cover illnesses of varying severity and types. You may also be covered for certain complex surgeries.
Because of this, considerations should be made to family health issues and genetic conditions. This might determine the provider you choose or the type of cover that would suit you.
Family Income Benefit
While income protection will cover you if you are unable to work due to illness - this policy will provide your beneficiaries with a lump sum or regular monthly payments after you die or are diagnosed with a serious illness.
It is up to you to decide how long your term lasts and similar to life insurance - a regular monthly income will replace your lost earnings.
Before you take out this type of policy, there are a few things you may need to consider. These will ensure your family is as secure as possible if you were to pass and that you can actually afford the level of cover you’re looking for.
Family Living Costs
It is important to think about the impact of future living costs as well as any mortgage repayments and other loans. The people who depend on you now will still need just as much financial support when you’re not around anymore.
Because of this, you should consider the level of protection you opt for. Different providers will offer certain packages and the cost of each may depend on a few variables such as:
Your Age
The value of the payout
Medical history & underlying conditions
What Length Term You Opt For
People’s preferences for the length of cover tend to vary depending on their family situation. You may decide the best option is for your financial protection to last until your children are financially independent.
After this, there is less concern about managing ongoing payments and ensuring they have the support they need. Particularly where one parent is the main earner in the family, this type of protection may appeal.
Frequency of Payouts
If you’re looking for a lump sum payout, life insurance may be a better option for you. While you can receive family income benefits this way, its real purpose is to provide regular payments that help with the general cost of living and stability of your family’s future.
Choosing monthly payments will ensure the loss of your earnings is replaced in some capacity. It also reduces the risk of your payout being used for things it was not intended for. Consider which you’d prefer before choosing between family income and life insurance.
Want More Advice?
Financial protection is a crucial consideration for people with dependants. It gives you peace of mind, knowing they will be looked after in the event of losing you and/or your income.
Similarly, should you suddenly fall unwell, different types of cover are available to keep you and your family afloat as well as cover the costs of adapted living arrangements or medical bills.
It’s well worth looking through every option and weighing up the benefits of each one. However, should you need some more advice or information, our team will be happy to help. We will take into account your current situation and offer you advice and clear projection for the future. Our initial consultation is completely free and there’s no obligation to go any further. So if you want to hit the ground running, get in touch today.
