What financial protection do you have against the unexpected?

Financial News

Financial planning means saving for retirement, managing debt, and also preparing against the shock of the unexpected.

And yet a recent Money Marketing report suggests that UK savers are ‘worryingly exposed’ to financial shocks.

Are you planning for the future? Does your plan include financial protection against the unexpected?

Here’s why the answer to those questions should be ‘yes’. And how we can help if it isn’t.

Make sure you have an emergency fund

The simplest thing you can do to ensure you are protected against the unexpected is to put an emergency fund aside.

You should aim to have easily accessible savings totalling between three to six months of household living expenses.

This can help you remain financially secure should you lose household income, whether through accident, illness, or redundancy. It can also be used to cover unexpected costs without the need to accrue debt.

If you don’t currently have an emergency fund – or it isn’t yet as large as the recommended amount – don’t panic. Simple cashflow modelling could help you budget more effectively and help you identify your disposable income.

Build an emergency fund at a pace that is right for you. And then ensure it remains there for when you need it.

Protect yourself and your family

Guarding against the unexpected means acknowledging that the unexpected could happen to you.

Here are a few products you might consider.

  • Income Protection

If you have dependents relying on your income to pay a mortgage or a child’s education fees, the sudden loss of that income could have serious consequences.

Income Protection will pay part of your income if you are unable to work, whether through illness or disability, and will pay out until you start working again. Alternatively, it will pay until the soonest of either retirement, death, or the end of the policy term.

Income Protection generally covers most illnesses that leave you unable to work and you can claim as many times as you like during the length of the policy, although there are exclusions so it is important to read through the policy document and discuss any potential claim with your adviser.

This gives you peace of mind that whatever happens between now and your retirement you’ll continue to receive the income your family depends on, even if you are unable to work.

  • Critical Illness Cover

Critical Illness cover pays out a one-off lump sum if you are diagnosed with certain conditions set out in the policy. It might also allow for ongoing payments in some circumstances.

Critical illnesses will generally include a stroke, heart attack, and certain cancers. Other conditions such as multiple sclerosis, organ transplants, Parkinson’s disease could also be included.

Check with your provider or speak to us before taking out cover. We can help ensure you have the right cover in place for you.

Becoming critically ill could mean the loss of employment income and difficulty keeping up mortgage payments. The money from a Critical Illness Cover payout could also cover the cost of treatment or home adaptations.

  • Life insurance

Life insurance can provide you and your family with peace of mind that they will be financially looked after when you die. But what type of insurance to choose?

Level Term Assurance pays out a specified lump sum amount if you die within the policy term. Take out £100,000 of cover for 20 years and that amount will be paid out on your death at any point during the term.

You might match the term to the end of your mortgage repayments or a child becoming financially independent. This could reassure you that your family will be looked after.

But remember that once the term is over, you have no cover, and there will be nothing to payout on death.

You might consider Decreasing Term Assurance where the sum assured reduces over time. It is great for paying off a reducing debt and could be one of the cheaper ways to ensure a debt is paid off in the event of your death.

If you want a guaranteed payout, you might opt for Whole of Life Cover.

These plans can be expensive because they are guaranteed to pay out at some point. You will also usually find that the provider will only guarantee premium amounts for a set number of years, after which, your plan will be regularly reviewed. The cost of premiums could increase significantly.

When written in trust, you can use a Whole of Life plan to cover an Inheritance Tax liability.

Protect your business

Protecting against the unexpected and ensuring financial stability for you and your family doesn’t just mean protecting yourself.

As a business owner, your family’s financial security is tied to the success of your business.

Business Protection Insurance can help you protect your business against the loss of key personnel and fellow directors. It can also be used to pay off outstanding debt or to help ensure you keep control of your business should a partner die.

Get in touch if you think you and your family would benefit from Business Protection Insurance.

Get in touch

If you’d like to discuss building a rainy day fund and protection policies into your long-term financial plan, get in touch. Please email info@investmentsense.co.uk or call 0115 933 8433.

Please note

Life Assurance 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.