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11 Jun 21
The ‘What Ifs’ – and why you need Financial Protection in every stage of life
The ‘What Ifs’ – and why you need Protection in every stage of life
They have been thinking about what would happen to their family if they were no longer around. They may have lost someone close to them and have seen the harm that being unprepared can have.
The catalyst for identifying the need for cover such as life assurance, critical illness cover or income protection is often dependent on your position in life. In simple terms this can be split up as follows:
Often, this stage of life is when the impact of a life changing event would be felt most as you have a family who are reliant on the income you bring in. You probably have a mortgage or loan that would need to be repaid if you have died.
You might not have any long-term sick pay provision through work, and you wouldn’t be able to get by on the statutory £96.35 per week provided by the state. You would want to ensure that if you suffered a serious illness you would receive a lump sum payment allowing you and your partner to take some time off work to get through it together.
There is also real benefit to looking at cover now rather than later, primarily because your health tends to be better earlier in life, which leads to a lower cost throughout the life of the plan. Also remember, by the time you need to claim, it’s ALWAYS too late to take out a policy.
It’s also important to be mindful when thinking about younger family members like children and grandchildren, who might not have any cover in place. Your Independent Financial Adviser (IFA) would be more than happy to have that conversation with them if needed.
By retirement, the hope is that you will have some savings to provide for you in retirement and these could be used to fall back on if you passed away or suffered a serious illness. However, at retirement you would no longer receive any death in service or other benefits provided by your employer.
In some cases, replacing the lost cover wouldn’t be needed, but is the duty of your IFA to assess what would be the impact to you and your family if the worst happened. If this peace of mind could be provided by a small life policy, you must agree that it would be worth looking into.
This is often an overlooked area of protection planning. However, in later life it is harder for us to replace any lost income or rebuild our savings if needed. This means that if an income you had been accustomed to (like a partner’s State Pension) is lost, your standard of living may need to reduce in line with your lower income.
You may not be concerned about the above, as you have enough savings. You may even be expecting a tax bill if you passed away. Your adviser would no doubt have explained all the possible ways of reducing your inheritance tax liability. Where a liability is unavoidable, life cover could be considered. A guaranteed payout if you passed away might be a good way to pay that tax bill.
Protection cover may or may not be the answer, but the important thing would be to ask the questions. The ‘what ifs?’ and ‘what would be the impact of?’ and ‘would I have enough?’ can all be answered by an Independent Financial Adviser.