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05 Oct 20
Secure Your Financial Future – Find the Right Financial Protection For You
We insure our cars, our home, our mobile phones, our pets, but how many of us insure ourselves and our financial future? The answer is not everyone!
Protecting what you earn, what you own, what you owe and those you love, is the foundation stone of the pyramid of financial planning and yet almost two thirds (65%) of UK adults have no protection cover at all and more than seven in ten (71%) have no life assurance.
Q What types of financial protection are available and which should I choose?
A There are several main types of Financial Protection to choose from. Each will cover you under different circumstances so it is important to choose the right one. Your Independent Financial Planner will be able to advise you which one is the most appropriate for your needs.
- Life Assurance would provide financial support for your dependents through a lump sum if you die unexpectedly. This can be used to pay off mortgages upon death and for those with financial dependents it can provide a lump sum to ensure your family would be financially secure in the event of your death. Family Income Benefit policies are also available which would pay out a regular monthly tax free amount for a set term, for example until your children have completed university education or to cover family monthly bills for a period of years after your death.
- Critical Illness cover pays out in the form of a lump sum payable if you are diagnosed with a specified type of serious illness. This can also be linked with a life policy, perhaps in relation to your mortgage borrowing to ensure it is paid off in the event of either death or diagnosis of a serious critical illness.
- Whole of Life Cover has no fixed term and cover lasts until your eventual death. This means there is a lump sum whenever you die. This kind of policy is often taken out to cover future inheritance tax bills which vary depending upon the size of your estate.
- Income Protection Cover pays out should you find yourself unable to work through illness or disability and have no income to cover bills. Both short term and long term policies are available, with short term policies generally paying out for one or two years and long term policies which usually provide a regular income until you are well enough to return to work, or until the end of the policy term. These can be deferred to start after any sick pay from an employer has finished.
Q How do I know how much cover I need?
A This is an important decision; as a starting point you need to ensure you have enough cover to clear outstanding debts such as your mortgage in the event of death. You may have a goal to make sure your family is provided for when you are no longer there. You may also wish to provide for your own ongoing financial commitments in the event of illness.
Points to consider include – How much cover do you already have? Is any cover provided by your employer? Another factor to bear in mind is the monthly cost of the policies and what budget you have in mind for the monthly premiums.
There are various calculators available on the internet to assist with this, but for some this can be a difficult task. Another option is to approach an independent financial adviser who can work with you to establish needs and agree priorities in order to help you achieve the peace of mind associated with knowing you have protected your own financial future, as well as your loved one.