Blog written by George Critchley
Financial Protection is the foundation stone of most financial plans
Will you get round to it? In my early days as a financial adviser, I used to arrange a lot of financial protection (life assurance, income protection and critical illness cover) for my clients. I met all sorts. They tended to fall into 1 of 2 camps: – those who genuinely wanted to protect what they had, family, kids, loved partners and business partners, business value, and those that were dubious.
My boss on day 1 told me, that sooner or later I would get a call that would stop me in my tracks. It would be the wife or husband or partner or child, of a client, who unbeknown to me had died, or suffered a critical illness. My first thought would be…. Did I do my utmost to help them protect themselves?
It was 5 years before this actually happened. It then occurred on a regular basis. My boss was right. I realised he was also correct when he added, “it won’t be the one you might expect.”
Peter was just 35 when liver cancer came into his life. Not for long. He was dead within weeks. He was single, his only liability was his mortgage. Peter didn’t believe in life assurance. His mortgage company still insisted that the mortgage be paid for 12 months after his death. He had a 95% mortgage. Larger financial institutions don’t handle death very well! For my part, I helped his traumatised parents administer his estate. They themselves were hard up. Only some quick work with Peter’s small pension fund saved the day.
My next client Daniel was even younger than Peter. Daniel married young and by his late 20’s he and his wife and young son lived in their newly purchased first home. Daniel got testicular cancer…bad news? Not as bad as you might think. It was caught early, treated quickly and he made a full recovery.
Even better news, he had critical illness cover protecting his mortgage. The policy paid out, the mortgage was paid off in full. With no mortgage to pay Daniel changed jobs, and trained to became a publican. One of his life’s ambitions.
A common misunderstanding is that the more money or assets you have, then the less financial protection you need
As your money and assets grow our financial responsibilities grow
Say you are a business owner. You own a half of a successful small engineering firm, worth £5m. Good salary, and pension, life is rewarding you well. Then your co-Director dies unexpectedly, the following questions enter your mind.
- Who will do the co-Directors work, as well as they did?
- How long and at what cost will I find the replacement?
- How do I buyout his spouse for £2.5m?
- Will the business bank lend money to cover the £2.5m? Usual answer is No
- Do I want to be in business with my co Directors widow/er. They now own 50% of my firm?
So don’t delay in considering financial protection, you just never know when you may need it!
If you would like to speak to one of our Independent Financial Advisers, please complete our enquiry form or call 01257 260011