After an unprecedented year, the importance of preparing for the unexpected has never been so clear.
Financial shocks – whether a stock market crash, sudden redundancy, or loss of income due to illness – can hit us all, and at any time. Factored into a long-term financial plan though, the consequences need not be dire.
Protect your family by making use of available protection products. You’ll put yourself in control of your finances, have greater confidence in your plan, and peace of mind that you and your loved ones will be looked after should the unexpected happen.
1. Income Protection
A report earlier this year by Cirencester Friendly confirmed that while a third of UK employees have – or would take out – pet insurance, just 17% had considered Income Protection.
And yet if you have a household that relies on your income to pay the mortgage, a child’s school fees, or veterinary costs, for example, a loss of income will have serious ramifications.
Income Protection is an insurance policy that pays out if you’re unable to work because of an accident or illness. It helps cover your lost income and will usually do so until you return to work (or until you retire, die, or reach the end of the policy term).
The policy begins to pay out after a pre-agreed deferral period has passed and will generally pay a percentage of your earnings. Most illnesses that leave you unable to work are covered and you can usually claim as many times as you like during the length of the policy.
This can help to keep you afloat during a challenging time and relieve the added stress of money worries while you try to get back on your feet. Be sure to read through the policy document to check for any exclusions and speak to us before you decide. We can help to find the right policy for you.
Remember that if you become ill or have an accident after the term ends, you won’t be covered. You should also be aware that Income Protection won’t cover redundancy.
2. Critical Illness Cover
Critical illness can strike any of us, at any time. When it does, aside from the cost to our health, there will be financial costs to consider too.
Lost wages, home care, even the cost of a hospital car park can add up over the course of a year.
Critical Illness cover pays out if you are diagnosed with certain illnesses, as set out in your policy. These will usually include strokes, heart attacks, and some cancers, but might also include conditions such as multiple sclerosis, organ transplants, and Parkinson’s disease.
Critical Illness Cover will normally pay out a one-off lump sum but might make ongoing payments in some circumstances. You might use the money to keep up mortgage repayments, as help towards medical expenses, or to fund adaptations to your home.
Be sure to get in touch with us before you take out a plan and we can help find the right cover for you.
3. Life cover
Life cover pays out a lump sum (or sum assured) when you die. If you have dependents, the peace of mind that comes from knowing that they will be financially protected when you die is hard to put a price on.
Yet, according to comparison site Finder, only 50% of households with mortgages have life insurance.
And that, even though the average outstanding mortgage debt in November 2019 stood at £131,724, the average price of household bills for a year is £19,500 and the cost of dying in 2020 is calculated at £9,493.
- Whole of Life cover
As long as you continue to pay the premiums, a Whole of Life plan will pay out when you die. This guarantee can make Whole of Life plans expensive though.
Although the initial premium will be guaranteed for a certain of years, once that time has elapsed your plan becomes ‘reviewable.’ At each review, your premiums could rise, increasing the cost of the plan significantly over time.
- Level Term Assurance
Level Term Assurance will pay out a specified lump sum amount, but only if you die within the policy term. Take out cover worth £100,000, for example, over a 20-year term, and policy will pay out the full £100,000 if you die at any point within those 20 years.
If you have outstanding debt or ongoing costs that will continue to be paid after your death – mortgage repayments or a child’s school fees – you might align the term of the plan, and the sum assured, to cover this specific debt.
Knowing that your mortgage will be covered, even in the event of your death before it is fully paid off, should give you and your family enormous peace of mind.
The most important thing to remember is that once the term ends you have no cover.
- Decreasing Term Assurance
The size of a debt such as a mortgage decreases over time. Therefore, the pay-out you would require from your cover also decreases. This is where Decreasing Term Assurance comes in.
You still take out the plan for a specific term, aligned to your mortgage for example, but as the mortgage debt decreases, so does the sum assured.
You still have the confidence and peace of mind that your mortgage will be paid off in the event of your death, but because the sum assured reduces over the 20-year term, the premiums are often much lower.
Decreasing Term Assurance can also be useful if you’ve just started a family. The amount of cover that would be needed might decrease as your children grow up and become adults.
As with Level Term Assurance, remember that once the term is over the cover stops and there will be nothing to pay.
Get in touch
Protecting your family against the financial upheaval of an unexpected shock can give you enormous peace of mind. Whether through a loss of income, accident, or death, if you have dependents relying on your income to provide for them, putting plans in place now is vital.
To discuss any of the products mentioned here, or any aspect of protecting you and your family against the unexpected, get in touch. Please email hello@fingerprintfp.co.uk or call 03452 100 100
Please note
Life Assurance 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.
