Having sufficient funds available to cover the cost of a car accident, significant vet's bill, house fire, or theft may seem obvious (and, in some cases, it’s mandatory). It’s why we insure our cars, pets, homes, and personal possessions. So why don’t we feel the same way about finding the right protection for ourselves?

We believe that protecting your income, assets, debts, and those you love is the foundation stone of financial planning. After all, the life you’re living and the future you’re planning depends on the money being there to pay for it. However, over half (53%) of adults don’t have any protection at all, and 36% of parents have no life insurance cover despite having family members who rely on them.

Over half (53%) of adults don’t have any personal financial protection at all

Why is protection insurance under-valued?

Perhaps people are put off paying for something they don’t believe will pay out. But with one in two people developing a type of cancer at some stage in their life, these odds might suggest otherwise.

Some might prefer ‘self-insurance’ – ie. saving an amount each month to cover unexpected expenses. This is sensible when it comes to rainy day funds, but could you save enough to cover an outstanding mortgage? And what about inflation eroding the value of your savings?

Others might see protection policies as an unnecessary expense with no immediate benefits, especially in the context of a cost-of-living crisis. However, protection insurance offers far more than just keeping the roof over your head. We suggested earlier, that it’s the foundation of a financial plan. It could help to secure the savings and investments you’ve built up over the years to achieve a certain lifestyle and provide for your future. It gives you peace of mind, time and space if the worst were to happen – whether that’s time and space to recover from a serious illness, get through a bereavement, or pay the bills for a set amount of time. It ensures your family will be taken care of and able to maintain their lifestyle without financial constraints.

What types of financial protection are available, and which should I choose?

There’s a range of protection insurance available, including financial protection, life insurance and critical illness cover. It’s important to make an informed choice based on your personal circumstances, budget and any existing arrangements in place (to avoid paying for cover you already have). An Independent Financial Planner can provide tailored advice on the best options for you. These may include:

Life Assurance: This provides a lump sum if you die while covered,, usually to pay off a mortgage, or supplement the lifestyle of your surviving family. You can take out Term cover, where you’ll pay premiums for a set period of cover (to match your mortgage term for example), or Whole of Life cover, which will last as long as you do. The latter is typically used to help cover an Inheritance Tax bill.

Family Income Benefit: These policies pay out a regular, tax-free monthly amount for a set term, on the death or serious illness of the policyholder. The term you set could cover your children while they’re still financially dependent on you, or to cover family bills after your death.

Critical Illness Cover: This pays out a lump sum if you’re diagnosed with a specified serious illness within the policy term. The money paid out can go towards private treatment and rehabilitation, or help continue to pay a mortgage, or cover lost earnings.

Income Protection Cover: Provides a monthly income if you find yourself unable to work due to illness or a disability. Policies range from short-term (covering one to two years) to long-term policies (offering a regular income until you return to work, retire, or the policy term ends). The policy starts to pay out after what’s called a deferred period, and you can usually set this to start after any sick pay your employer provides.

financial planning jargon

How do I know how much cover I need?

Deciding on the right amount of cover is important. Start by agreeing the objective for the cover, then check any existing provision you have. If you’re employed, you can factor in any existing Death in Service, critical illness and income protection benefits. You’ll want to take cover out from a reputable insurer (a brand you can trust to pay out on a valid claim) and make sure you’ve calculated how much you can realistically afford before committing.

An Amber River IFA will work with you to establish your needs and budget and agree a plan that gives you peace of mind, knowing you’ve protected not just your financial future but that of your loved ones.

Get in touch

To speak to one of our team, arrange an appointment or find out more, call 0800 915 0000, or alternatively use our contact form here.