From an accident or illness to the death of a business partner, the unexpected can strike at any time. That’s why protecting yourself against all eventualities is such a crucial part of your long-term financial plan.
There are lots of different types of cover out there so you’ll need to think carefully about the cover you currently have in place and any gaps you might have. It’s also important to weigh up the potential costs now against the higher cost of being without protection if the unexpected strikes.
Keep reading for a look at some of the events that could mean you need protection, but first, a quick look at some persistent protection myths.
3 common protection myths busted
You might have read our previous article on this topic, Revealed: 3 protection and insurance myths, published back in 2021.
Here are three common myths we discussed back then – ones that still persist – and why they simply aren’t true.
1. “My provider won’t pay out”
The Association of British Insurers (ABI) recently confirmed that insurers paid out £6.85 billion in 2022.
Not only that, but the number of new individual claims that have been successfully paid out has remained around 98% since 2017.
2. “Protection and insurance are too expensive”
A recent Royal London report confirms that 11% of Brits admitted reducing their protection premiums, or stopping them altogether since the cost of living crisis began. And yet protection can be relatively cheap, especially in terms of the peace of mind it can provide.
Unbiased suggests that the average cost for level-term life insurance can start from just £5.83 at age 30, rising to £30.20 at age 50.
If you have financial dependants, you’ll need to think carefully about whether you can afford to be without cover.
3. “It won’t happen to me”
Predicting the future is impossible and contemplating our own mortality isn’t easy. Unfortunately, though, the figures speak for themselves.
- The British Heart Foundation confirms that 460 people will die today from a heart or circulatory disease.
- According to Macmillan Cancer Support, someone in the UK is diagnosed with cancer every 90 seconds.
- The Chartered Insurance Institute (CII) reports that 1 million UK workers find themselves unable to work due to accident or injury each year.
4 different types of cover will protect you in different ways so think carefully about what you might need
1. You might need to cover lost income after an accident or illness
If your family is financially dependent on the employment income you bring home – to cover household bills or a mortgage, say – think carefully about what would happen if this income ceased.
An accident or illness might prevent you from working but income protection could help until you get back on your feet.
It usually pays a proportion of your salary each month, once your policy’s predetermined “excess” period has passed.
Be sure to check the types of illnesses that are covered and bear in mind that factors like age, pre-existing conditions, and the amount of cover you want will all affect the cost of premiums.
2. A critical illness diagnosis could have a more long-term effect on your finances
A critical illness diagnosis can be devastating, and while it might prevent you from working, you’ll want to concentrate on getting better, rather than worrying about the money you have coming in.
Unlike the monthly replacement of pay that income protection provides, critical illness cover generally pays a lump sum. The condition you are diagnosed with will need to be included in the policy, but you’ll usually find it covers (among others):
- Alzheimer’s disease
- Heart attack
- Stroke
- Some types of cancer.
The money you receive can be used to cover one-off expenses like home modifications or ongoing costs like your mortgage or treatment.
3. Life cover is vital if you have dependents, especially if there is still a mortgage to pay
You’ll want protection policies in place to protect your loved ones should the worst happen to you. Thinking about our own mortality can be uncomfortable but life cover can help to keep a roof over your loved ones’ heads if you are no longer around.
It doesn’t have to be expensive, but there are many different types so shopping around is key. At Fingerprint, we can take a look at your current provision and help you find the best ways to cover gaps.
You might consider:
- Term assurance, which pays out if you die within the agreed policy term
- Decreasing term assurance, which pays a decreasing lump (often aligned to a mortgage)
- Whole-of-life cover, which pays out whenever you die and so can be more expensive.
4. Business owner protection
Business Protection Insurance protects your business against the loss of its key people.
Think about:
- Loan protection to ensure debts if the death of a business partner makes repayment difficult
- Key person protection to help you cover the lost knowledge of a key partner and train new staff
- Share protection to buy back the shares of a deceased shareholder, allowing you to retain control of your business.
Times are tough for small businesses but protection could be an additional cost that is well worth the outlay.
Get in touch
If you are worried about the effect of an accident, illness, or death on your loved ones’ financial security, be sure to speak with us to plug any gaps in your current provision. Get in touch by emailing hello@fingerprintfp.co.uk or calling 03452 100 100.
Please note
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.
