Have you ever stopped to wonder what would happen if you suddenly lost your income? If you’re the main or only earner in your household, losing your income can have an adverse effect on your ability to reach your financial goals.
Millions of people have had their finances disrupted in 2020 by the pandemic, affecting their ability to fulfil their financial plans. This is why having the right protection in place can be invaluable. Read on to find out how financial protection can help you reach your long-term goals.
Having protection in place can help you overcome problems when they arise
According to a report by Royal London, the decision to explore financial protection products is typically made at a life milestone. Some of the biggest triggers for taking out protection are events such as buying a house or starting a family.
Planning for the unexpected is important, whatever stage of life you’re at. Whilst nobody likes to dwell on the possibility of accident or illness, preparing for those shocks can help you to better absorb them.
If you want to ensure that you are able to meet your financial goals, such as paying off your mortgage or building up a pension fund to provide you with a comfortable lifestyle in retirement, it is important to be able to overcome short-term financial disruptions.
Whilst keeping an emergency fund is a good start, organising financial protection can be an even better way of ensuring that you are able to reach your financial goals.
Income protection pays you a portion of your salary if you’re unable to work
If you want to safeguard your income so that short-term disruptions do not affect your progress towards reaching your goals, you may want to consider Income Protection. This can be especially valuable if you have commitments such a mortgage payments or education fees for your children.
If you are unable to work due to illness or accident, Income Protection will pay you a portion of your salary every month whilst you get back on your feet. These payments typically continue until you return to work or the end of the policy period.
Income Protection generally covers most illnesses which can leave you unable to work, although there are exceptions to this so it’s important to read the terms of your policy document thoroughly.
Having Income Protection can help you to ensure that your plans aren’t impacted if you’re unable to work for any reason.
Critical Illness Cover will pay you a lump sum if you are diagnosed with a serious illness
Being diagnosed with a serious illness can be both emotionally devastating and can cause significant harm to your life plans. This is where Critical Illness Cover can help.
Unlike Income Protection, if you are diagnosed with a serious illness, such as cancer or a stroke, Critical Illness Cover will pay you a lump sum rather than a monthly income.
This sum can be used to pay for private medical care, repaying your mortgage, or to maintain your current standard of living if you have to take extended leave from work. Without cover, you may have to dip into your savings, which could have a serious impact on being able to meet your goals.
Critical Illness Cover can help you to ensure that your financial goals won’t be affected even if the worst were to happen, letting you rest easy whilst you recover.
Life insurance can ensure that your family will be looked after if the worst were to happen
Whilst nobody likes to dwell on the possibility of death, having life insurance in place can be invaluable in protecting the finances of your loved ones if the worst were to happen.
There are several types of life insurance to consider, so it’s important to find the one that’s right for you. Some of the most popular policies are:
- Level Term Assurance: This policy will pay you out a lump sum if you pass away during the policy term. You may want to match the term with the end of your mortgage payments, so that your family won’t have to struggle to pay it after you die.
- Decreasing Term Assurance: With this policy, the payout sum decreases over time and can be useful if you have a repayment–style mortgage. It can be cheaper than Level Term Assurance as the payout decreases over time.
- Whole of Life cover: This policy pays out whenever you die and has no fixed term. This can be used to cover Inheritance Tax liabilities after you pass away, so your family aren’t landed with a hefty tax bill.
If you’re the main or only earner in your household, your death could be devastating for your family’s finances. That’s why having the right protection in place can give you peace of mind to know that when you pass away, your loved ones’ financial stability won’t be affected.
Get in touch
If want to put protection in place but aren’t sure which is right for you, we can help. Email enquire@london-money.co.uk or call us at (0207) 808 4120 to find out more.