What do we mean by protection? In a word, insurance - insuring against death, critical illness and ailments that prevent you from working.
Who does this apply to? Potentially everyone; regardless of whether you are employed, self employed or a business owner.
The starting point is to analyse the financial implications of your death, you suffering a critical illness or being unable to work due to illness or injury and establishing the cover you already have in place. If you are employed you may have a ‘death in service’ life insurance arrangement and possibly even income replacement provided by your employer, but as this is not mandatory for employers to implement many will not have done so.
The simple answer to all of the above is that an insurance policy can provide for each scenario.
Understanding who should own the policy, the lives to be insured, over what term and if a trust is applicable are all unique to each set of circumstances. This is the benefit of undertaking regular financial reviews with an adviser.
Protection is not a one-off arrangement as the circumstances surrounding you, your family and/or your business will change constantly – so your protection needs will also change.
Applications are medically underwritten prior to acceptance, ensuring the terms offered are unique to the individual(s) being insured. This also helps to minimise reasons for a policy not paying out, which along with cost is often cited as a reason for not insuring, but both tend to be myths.
From a cost perspective, just this week I have arranged £1m of cover for a couple in their late 20s for less than £70 per month. They may have to pay £8400 in premiums over 10 years, but in the event of death their family will receive £1m.
Don’t put off reviewing your protection. Most people insure their home, cars, pets and holidays, but how would you pay for any of these without your income?
I recently met with a client who was releasing money from a pension, but during our discussions it emerged that he had a critical illness policy on which they had not claimed when he had a heart attack two years prior. An application was made and the full £250,000 was paid out (meaning he did not yet need to touch his pension).