Coronavirus uncertainty has highlighted the need to safeguard your income
Financial advisers and insurers have reported an upsurge of interest in protection policies since the beginning of the coronavirus pandemic.
Protection is often called the Cinderella of financial management - because it’s more pleasant to think about growing your money than about worst-case scenarios. But it’s really important to get it right, as otherwise your family’s future could be at risk.
Why protect?
Protection products help ensure that your family’s plans and hopes aren’t thwarted by unexpected events. If you became too ill to work, or unexpectedly passed away, appropriate protection could mean the difference between your family struggling to pay mortgages, school or university fees, or remaining financially secure.
Protection needs are complex. Everyone’s circumstances are different, but a financial adviser should be able to help you understand what is necessary and appropriate for you.
What’s available?
There are several different types of protection policy available. These include:
- Income protection insurance
Designed to provide a regular income if you are ill or injured - Short term income protection insurance
Provides money for a short time if you are ill and unable to work - Critical illness cover
Pays out a tax-free lump sum if you are diagnosed with a serious illness covered by your insurance policy - Life insurance
Pays money to your dependents if you die, as a lump sum or a regular income depending on the policy you choose
Do I need protection?
Not everyone needs protection policies - though everyone would benefit from a chat about them with a financial adviser. If you and your family rely on your income for living costs and would struggle if you were unable to work, that’s a key reason to take a policy out.
Pre-existing conditions may make it harder to get cover or may make cover very expensive. Costs can vary widely too, so it’s important to compare policies and talk to an expert.
Before you buy a new policy, it is also important to check whether you are already protected. For example, your employer may offer a ‘death-in-service’ payment that could reduce the need for life insurance. Some policies may overlap, too, so your entire position needs to be considered. There’s no point in paying for policies you don’t require.
When should I review this?
Your need for protection products will change depending on your responsibilities and financial circumstances.
It’s certainly worth reviewing when you marry, have children or take on a large financial commitment, such as a new house with a mortgage, change jobs or start a business.
To ensure your family and finances are properly protected, book a review with an independent financial adviser. In these times of uncertainty, it’s more important than ever.