The Role of Protection in Comprehensive Financial Planning
When considering financial planning, pensions and savings often come to mind first. However, protection should be a fundamental part of any financial plan, even though it’s frequently overlooked.
If you’re concerned that illness or injury could leave you without the ability to cover your bills, there are options to explore. Some individuals may rely on state benefits as a safety net in case of a sudden loss of income. However, for many, the reduction in income would be too significant to maintain their current standard of living.
Being Able to Keep Paying Bills
In many households, both partners’ incomes are needed to cover monthly expenses. Often, people don’t consider how losing one income could affect their ability to maintain their lifestyle. While life insurance is a common consideration to pay off a mortgage in the event of death, fewer people plan for how their family would manage financially if they became ill or injured and were unable to work for an extended period.
Have you thought about whether you and your family could keep paying the bills if something unexpected happened? Recent global events have prompted many of us to reflect on the importance of protecting ourselves and our families from financial difficulties. This isn’t just about having savings and investments for long-term goals—it’s also about ensuring financial security in the face of unforeseen circumstances.
Sufficient Savings to Manage Financially
Have you calculated how much money you and your family would need if you were unable to work? This assessment should consider any savings and other income sources you may have. A Budget Planner can help you determine your monthly expenses, from household bills to everyday living costs. Knowing your overall budget can make it easier to make necessary adjustments.
Not everyone has sufficient savings to cope financially with a prolonged illness, especially if that money is set aside for other future goals, such as retirement or children’s education. This is where insurance protection comes into play. There are various options available that can cover specific costs or replace income if you’re unable to work. Which option is right for you will depend on your individual circumstances, including factors like age, health, and lifestyle, which can affect the cost of premiums.
Income Protection
Income protection insurance offers a regular replacement income if someone is unable to work due to illness or injury. Typically, this type of policy begins to pay out after the policyholder has been off work for six months, a period often referred to as the “deferred” or “waiting period.” The policy can continue to pay a percentage of their salary until they either:
- Return to work
- Reach the age at which they qualify for a state pension
- Pass away while claiming
Critical Illness Cover
Critical illness cover provides a tax-free lump sum if a policyholder is diagnosed with a critical illness or requires surgery for a qualifying condition, provided it meets the policy’s definition during the policy term and the individual survives a specified number of days. This cover is designed to provide financial support while the policyholder focuses on recovery, alleviating concerns about ongoing bills and expenses.
Life Insurance Cover
Life insurance cover pays a lump sum if the policyholder passes away during the policy term. In some cases, if diagnosed with a terminal illness and expected to live fewer than 12 months, the policy may provide the sum before death. This ensures that financial support is available for loved ones, helping with expenses such as mortgage payments or maintaining their standard of living.
Private Medical Insurance
Private medical insurance covers the cost of private healthcare for treatable conditions. This can include everything from overnight stays and outpatient treatments to diagnostic tests and follow-up care. Policies vary, offering different levels of coverage at various price points, ensuring a solution that meets individual needs.
Time to Safeguard Your Financial Future?
The possibility of passing away prematurely, suffering a serious illness, or sustaining an injury is something most of us prefer not to dwell on. However, being prepared can alleviate financial stress for you and your family, should the worst happen.
For more information or to discuss the issues raised in this article, consider seeking professional financial advice tailored to your specific circumstances.
Founded in 2017, Fintuity has fast become one of the only digital Independent Financial Advisers (IFA) in the United Kingdom. Fintuity offers a wide range of financial advisory services including pensions, protection, investments and mortgage advice. The key difference is that as an exclusively digital service, we can offer significant savings and a service that is direct to you and on demand.
The information provided in this article is for general purposes only and is not intended to address your individual financial needs.
Personal circumstances vary, and not all of this information will apply to every situation. Always seek specific advice from a financial professional before making decisions. While efforts have been made to provide accurate information, its relevance and accuracy at the time of reading cannot be guaranteed.
