How financial protection helps keep you on track


When we think about insurance, it’s probably your home or possessions that spring to mind. Your income is just as important, yet it’s often overlooked. Reviewing your financial protection could help your plans stay on track when things outside of your control have an impact.

What is financial protection?

Financial protection is a term used to cover a broad range of products that essentially protect your finances. There’s more than one type of financial protection. So, it’s important to understand what a policy would cover before you take it out and whether it’s right for you. When taking out a policy, you need to look at your current situation, goals and priorities.

When we speak about financial protection, it usually covers three main types of policy:

1. Income protection

This is designed to provide you with a reliable, regular source of income should you become too ill to work or involved in an accident. Following a deferred period, which will vary depending on the policy you choose, you’ll receive a regular income from the policy. This is usually a portion of your typical salary, such as 70%. The policy will continue to make these payments until you are able to return to work, retire or the policy term ends. This policy can give you peace of mind that should something happen, you’ll still able to meet financial commitments. It can give you the time and space to recover without having to worry about bills.

2. Critical illness

If you’re diagnosed with an illness that’s defined in your policy, critical illness cover will pay out. However, unlike income protection, it will pay a one-off lump sum. This is money that can be used to help you find your feet during what may be a difficult time. It could also be useful if you need to make adaptations to your home or save for the future. As it’s a one-off payment, it’s important to think about how it can be used to ensure your financial security for the rest of your life.

3. Life insurance

If you’re worried about how your family would cope financially without your income should something happen to you, life insurance can provide you with peace of mind. Taking out a life insurance policy means your family would receive a one-off lump sum if you were to pass away. This can be used to pay off financial commitments, such as your mortgage or other debt, and cover ongoing costs too. It’s a cash injection that can help your family financially during a difficult time and allow them to focus on what matters most.

A cash injection when you need it most

Taking out a financial protection policy can be daunting. After all, no one wants to think about becoming ill or passing away. But it can provide a cash injection when you need it most.

Even the best-laid plans can encounter obstacles along the way. When your income stops due to circumstances outside of your control, it can affect your plans in the short, medium and long term. Receiving a cash injection, whether ongoing payments or a lump sum, can help you stay on track and achieve goals.

To benefit from financial protection, you will need to keep up with premiums. But the peace of mind and confidence it offers can mean it’s a valuable policy to have.

The cost of premiums varies significantly and are linked to many factors. For example, your health will influence how much a policy costs, as well the level of cover you want should something happen. You need to ensure that you have an appropriate level of cover for your needs, financial commitments and plans, whilst balancing the cost. It’s worth shopping around to find the right policy and provider for you.

Choosing the right policy for you

Whilst the three main types of policy are outlined above, there are other things to consider when choosing a policy too:

  • What level of cover do you need?
  • Could you cope with a longer deferred period?
  • Do you have other assets that could provide financial support?
  • What will the premiums be?

Life Assurance plans typically have no cash in value at any time and cover will cease at the end of term. If premiums stop, then cover will lapse. Any financial protection product you take out should fit into your wider financial plan. Please get in touch to discuss your needs and how it could help you stay on track.