20 Apr Do you have the right protection in place?
It can feel like a loaded question, but asking yourself whether you have the right personal protection in place is a question that every adult ought to ask themselves.
If the answer turns out to be, “Yep, I’m all covered!”, that’s brilliant. But unless you stop to ask yourself a few big questions (and find out what products are out there), you’ll never know.
And whatever you think you know, the answer may well surprise you.
The different types of personal protection
When we say “personal protection”, we don’t mean installing CCTV or trying to train your cuddly cocker spaniel to patrol your home’s perimeter.
In this context, personal protection refers to a range of insurance products that are designed to provide you with financial protection if life throws you a curveball.
While there are a wide range of personal protection products, the three types we’ll cover here are:
- Life insurance
- Income protection
- Critical illness cover
It’s worth noting here that not everyone needs these insurance products. For example, your employer may provide you with adequate coverage should you die or become ill and unable to work.
However, don’t assume that just because you’re employed, you might not opt for protection products like these. You may find that you don’t yet have the level of protection in place that you would prefer to have.
It’s worth having a conversation with an independent financial advisor like HWIFM. As protection specialists, we can help you understand your options and make a decision that suits you, your family, and your financial goals.
Protecting your family with life insurance
Life insurance (sometimes called life cover or life assurance) is a policy that gives your family financial protection should you pass away.
This protection comes in the form of a lump sum of money that your loved ones receive after you die. The size of the sum depends on the level of cover you choose and typically goes towards maintaining living standards, like covering monthly bills.
If you’re employed, your employer may provide you with adequate life cover through work. Death in service benefit, for example, pays out a tax-free lump-sum to your family typically worth 2 to 4 times your annual salary.
Depending on your family’s circumstances, that amount might be plenty. You may feel that paying additional monthly premiums for a life insurance policy is unnecessary.
However, it is well worth considering whether coverage through your workplace is suitable.
- Is that figure enough to provide financial security for your family if you were to pass away?
- Would you prefer to be able to dictate how much the lump-sum benefit would be, who receives it, and how?
- What would happen if you were to leave your place of work and forfeit your coverage?
Finding the most suitable life coverage for you
There’s no one “correct” approach when it comes to arranging suitable cover for you and your family.
For some people, investing in a life insurance policy in addition to benefitting from workplace life coverage or death in service benefit is the right call. This strategy might even bring down the cost of cover, because you’d require less of it.
As we mentioned up top, life insurance policies are not necessarily for everyone. But if you’re self-employed, have a mortgage, or have a partner and/or dependant(s) that rely at least in part on your income, the right kind of life cover is seriously worth considering.
Whatever your unique circumstances, we can help you figure out whether a protection product like life insurance is right for you. If you already have a plan in place, we can also help you review it and ensure you and your family have suitable coverage.
Protecting your family’s income
Life insurance provides a financial safety net for your family in the event of your death.
But there are also personal protection products that provide financial support if you were to become ill or unable to work. Income protection and critical illness cover are different products that can help you and your family weather life’s proverbial storms; but how do you know if they’re right for you?
Income protection is a long-term insurance policy that provides you with a monthly income if you can’t work due to illness or injury. Designed to allow you to maintain your lifestyle while you are unable to work, income protection pays a proportion of your income each month.
Critical illness cover functions in a similar way, except you receive financial support in a single tax-free lump-sum. The policy will cover you only if you’re diagnosed with a condition from specific list of serious, potentially life-threatening illnesses (e.g. cancer, a heart attack and motor neurone disease).
While income protection and critical illness cover work well for some people, like all financial products they’re not necessarily for everyone.
“Is income protection or critical illness cover right for me?”
Most people who are employed by a company will receive statutory sick pay if they need to be off work. That’s why some level of income protection or critical illness cover is a must for people who are self-employed.
However, that doesn’t mean employed folks should discount income protection or critical illness cover out of hand.
You might have a great employee benefits package, but would you be financially supported if you were to become seriously ill for six months or more? How would you and/or your dependants cope if you were to sustain an injury or illness that seriously impacted your ability to work?
They’re not nice questions to ask – and hopefully, it’s a situation you’ll never need to face.
But if you have monthly bills, a family to support, or you don’t have someone who could support you financially, it’s better to ask the question now: Do I have the right protection in place?
Asking yourself these questions is something we can help with. Get in touch with our team of independent financial advisors today, and let’s explore whether you have the right protection in place for you.