No matter how much you plan and prepare for the future, life can throw unexpected events your way from time to time.
Indeed, an unforeseen illness could mean you’re unable to work and cover essential bills, or a sudden bereavement might mean your loved ones face a change to their financial circumstances.
While these are challenging scenarios to think about, incorporating financial protection into your plan could offer some comfort and reassurance, providing a vital safety net should the worst happen.
Despite its importance, LV= reveals that 48% of UK workers lack any cover. So, continue reading to discover why it’s so vital to consider protection as part of your financial plan.
Protection can act as the foundation of your entire financial plan
The entire purpose of financial protection is to cover you and your family from events that could significantly affect your finances.
It’s worth thinking of it as the unseen, yet critical, foundation of your financial plan. Just as you wouldn’t build a house without a solid base, your wealth needs the stability that protection often offers.
You’re likely saving for the future, whether that’s putting money aside for a house deposit, planning a special purchase, or building a retirement fund to support your dream lifestyle in the next phase of your life. Sadly, an unexpected event could threaten all of this. Without protection in place, you may be forced to dip into your savings if you experience a period of illness, using funds that you’ve earmarked for other goals. This could leave you with a shortfall, setting back your progress and adding additional stress to an already challenging situation.
Meanwhile, with the proper levels of cover in place, you could receive a payment that allows you to maintain your standard of living without having to access your savings.
In a similar vein, if you were to pass away unexpectedly, your family might struggle to maintain their lifestyle without your income. A payout could help them shoulder immediate costs as well as securing their long-term future.
Protection is essentially the anchor that keeps you and/or your family working towards long-term goals, even in the face of the unexpected.
Protection can help you in many scenarios, and there are several forms of cover to choose from
There is no “one size fits all” solution regarding financial protection, as different types of cover are available to support you in various scenarios.
Income protection and critical illness cover
If you’re unable to work due to an accident or illness, income protection could provide you with regular payments – typically around 60% of your salary – helping you to cover essential bills such as your mortgage and utilities.
This could allow you to focus on your recovery without the added stress of making ends meet.
In addition, critical illness cover pays you a tax-free lump sum if you’re diagnosed with a serious condition covered by your provider.
You could use this money to fund private medical treatment or adapt your home to be more disability friendly if needed.
While you may think you need either one or the other, it might be prudent to consider a combination of both income protection and critical illness cover. The lump sum from critical illness cover could offer an immediate boost of financial support, while the regular payments from income protection can help you manage long-term costs.
Life insurance
Then, of course, there’s life cover. While it’s never easy to think about what might happen if you passed away unexpectedly, life cover may ensure that your loved ones would receive a lump sum to help them manage financially.
This might help them cover funeral costs, pay off the mortgage, or simply provide some much-needed financial support during an emotionally challenging time.
A financial planner can help you figure out how much cover you need
Aside from the financial benefits, having protection in place can be an incredible source of peace of mind. Even if you never have to use it, knowing that you and your loved ones are safeguarded from the unexpected means there’s one less thing to worry about.
However, even if you’re tempted to take out as much cover as possible, it’s worth keeping in mind that you should ensure that your protection is affordable and reflects your needs.
The right level of cover should be personal to you, your lifestyle, and your long-term goals.
This is where speaking to a financial planner is invaluable. We will take the time to understand your current situation, ambitions, and concerns for the future. We could then use this information to recommend the most suitable types of cover to fit your lifestyle.
Your protection needs aren’t static, either. As your life evolves, so might your need for a financial safety net. A planner can regularly review your cover and make sure it remains aligned with your circumstances, so you’re never left without adequate protection.
Ultimately, financial protection is about giving you the confidence to pursue your goals, knowing that you’ve built a strong foundation beneath your plan.
To find out how we can support you, please use our search function to find your nearest Verso office, email us at contact@versowm.com, or call 020 7380 3300.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Note that financial protection plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.
Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.