Ensuring that you have a financial safety net will give you the peace of mind that your family will be able to cope – even if your lives were unexpectedly derailed.

Here, we consider some life obstacles you may find yourself having to navigate one day, and the types of protection you can put in place for each situation.

It’s about as difficult to think about as it gets, but the most dramatic obstacle your family may need to contend with is your or your partner’s death. As well as the obvious emotional and practical impact, it can leave a family struggling financially for years to come if the right protection hasn’t been put in place.

Life insurance can provide the remaining partner and any children with a vital financial safety net. In return for a monthly premium, it will pay out a lump sum upon the insured person’s death. Without it, not only will those left behind have to deal with the grief and distress of losing a loved one, they’ll also need to work out how to pay next month’s bills.

Many people buy life insurance alongside a mortgage. This is called a ‘decreasing term’ policy, which is designed to ensure the remainder of the mortgage is paid off should you die during the lifetime of your mortgage,

A ‘level term’ life insurance policy is slightly different, as it pays the same amount whether you pass away ten months or ten years into the policy. For example, if you take out a 30-year term life insurance policy for £250,000, your loved ones will receive the full amount right up until the policy expires.

An ‘increasing term’ policy increases the amount paid out as the term of the policy continues – so the longer you live, the bigger the payout. The purpose of this is to combat the effects of inflation over time, which could otherwise gradually degrade the value of your payout in real terms.

You can also set up a life insurance policy to cover the Inheritance Tax (IHT) bill your family might otherwise need to pay upon your death. While you won’t need to pay IHT if you die and leave your estate to your spouse or civil partner, it’s a different story if you leave any money to your children.

Depending on the size of your estate, they may receive a hefty tax bill of 40% for anything above the ‘nil rate’ threshold (currently £325,000 per person). In this instance, the insurance policy pays out into a trust upon your death, and this money can then be used to pay the tax bill. Because the rules relating to tax are complex, subject to individual circumstances and can change at any time, it’s important to seek professional advice before setting up this type of arrangement.

If you’re interested to find out more about life insurance see What to ask when taking out a life insurance policy

If you were unable to work due to an accident, or illness, your employer would only provide sick pay for a limited period. And if you’re self-employed, you can’t claim Statutory Sick Pay (SSP), so you will receive nothing at all unless you have another source of income that lasts longer than your condition.

Research by Legal & General has shown that an average 30-year-old male has a 32% chance of being off work for one month or more because of illness or injury, rising to 42% for a 30-year-old female. As you can see, this is a real threat that can impact many people at some point during their lives.

There are a number of insurance policies you may wish to consider to guard against this situation.

Personal Accident or Injury insurance will cover you for any loss of income due to an injury. It’s typically offered as an optional add-on to a life insurance policy, but can be purchased separately. It would pay out compensation in the form of a one-off lump sum if you were to suffer from an injury that left you unable to resume work.

Income Protection insurance is a long-term policy that replaces your monthly income if you are unable to work due to an illness or injury. It will generally replace between 50% and 70% of your income for a set period of time. You can choose a shorter-term policy that lasts for one or two years but, in the main, income protection policies will last until you can return to work or retire.

For more information see What to ask when choosing an income protection policy

Critical illness insurance will provide a one-off payment if you are diagnosed with a critical illness such as a heart attack, stroke, certain types of cancer, multiple sclerosis and many others. Every policy covers slightly different illnesses, so it’s crucial to check this thoroughly before taking out a policy.

Generally, policies with a higher premium are likely to cover more conditions. Still, it’s best to talk to a specialist financial adviser who can help you decide based on your requirements and budget.

For more information see What to ask when taking out critical illness cover

Short Term Income Protection works precisely like a policy covering you for an illness or injury, but it will typically pay out for up to twelve months, giving you time to find new employment. Because the policy is time-limited, the monthly premiums will be lower than for a policy that covers a longer timeframe.

Mortgage Payment Protection Insurance will generally start to pay your mortgage repayments from three months after your earnings stop, and will continue to pay for up to twelve months. You would normally choose this policy as an optional extra alongside your mortgage.

These policies work well when you are employed, and when your departure from your employer is very clear-cut (for example, leaving as a result of redundancy).

However, if you are self-employed or a director of your own business, it can be tough to prove that you are out of work through no fault of your own. Before taking out any policy to cover unemployment, always seek the advice of a financial expert – otherwise, you may find you’re paying for a policy that’s not suited to your needs.

When considering different options, it’s important to think carefully about your specific circumstances, the chances of something going wrong, and the possible impact of having no protection at all. If you’re self-employed or running your own business, this can become quite complex.

There are many policies on the market, all of which have small print attached. To avoid being caught out by this, always seek the advice of an independent financial adviser to ensure the policies you buy give you the cover you expect. You don’t want any nasty surprises if you need to make a claim.

An Amber River financial planner will assess your needs, your family circumstances and the risks you face before recommending the most appropriate protection for you. And because all of our advisers are independent, they will search the entire market to find the best-value products that perfectly match your requirements.