As well as focusing on growing your wealth you need to ensure you have the right protection in place. Many people are fixated on getting their money to work and wanting to build wealth. They don’t see financial insurances as important. But you can’t build a house without foundations, and protection is part of this foundation. It is vital you have the right cover in place to protect your hard-earned assets from unexpected events in life. The right cover will give you peace of mind that you have something to fall back on.
It will give you a safety net, something that will help keep you on track financially even when things don’t go to plan. Protection can give you some time to get back on your feet, after say an illness that could prevent you from working. And it will help you to protect what is most important to you. From being able to keep up with mortgage repayments to keep your home safe to ensuring your family will be able to cope should anything happen to you. Don’t leave yourself exposed and make sure you and your family have a plan, should life take a turn.
Types of cover to consider:
Life Insurance
Pays out a lump sum on your death.
They are two types: Term Assurance covers a fixed period of time, say 10 or 20 years, and pays out if you die during that term. You can choose from level term, which pays out a lump sum agreed when you take out the cover. Or decreasing term, where the amount covered reduces over the term; Whole of Life continues throughout your life and pays out when you die.
Critical Illness
Pays out a lump sum if you get diagnosed with a range of critical illnesses that include some cancers, a heart attack, stroke or loss of limbs. Policies vary greatly so ensure you check the details to get the right cover for you.
Income Protection
Replaces part of your monthly income if you’re unable to work due to illness or injury. It continues until you retire or return to work.
Mortgage Payment Protection
Pays out a set amount each month to cover mortgage repayments in the event of accident, sickness or unemployment. Usually pays out for 12 or 24 months.
Decreasing term mortgage protection
I would always suggest you set these up on joint life, first death basis, so the mortgage is cleared should anything happen to one party.
Family Income Benefit
Pays a monthly benefit for a set period e.g. until a child reaches age 21. This can be useful for ensuring your family have an income should you pass away. Due to the nature of these products being only for a set period they can be more cost effective than traditional life insurance which provides a large upfront payment.
Is also useful for those who are divorced and receiving child maintenance as it allows you to protect against the maintenance payments for the term that they are being paid.
If you have a business, then you might want to consider Executive Income protection as the premiums are tax deductible for a company.
Important things to consider
Do you have any protection cover via your job? If so, check it is sufficient to cover you and your family’s needs. Top up the cover if you feel you need more comprehensive protection.
Don’t forget to think about life cover for a non-working partner. If you have children, it can be crucial to help the family finances ongoing should something happen to one of you.
If you are single and don’t have dependents, income protection and critical illness may be more important choices to ensure you can cope with unforeseen events.
As your situation changes ensure that the cover you have in place is still sufficient.
Frankie Smith runs FSWM (fswm.uk), one of a very few female-run, independent wealth management firms, and Frankie’s, a networking organisation that runs regular events where people can improve their financial know how.
She is passionate about moving the advice industry forward and making it accessible to a much wider audience.
