One of the many things the Coronavirus pandemic has highlighted is that the unexpected can happen at any time, to anyone, and that it’s really important to have a financial safety net in place just in case.
But financial protection – be it life cover, critical illness cover or income protection – is often overlooked. In fact, twice as many people would choose to insure their pets over themselves!*
But there are many ways you can ensure you’re adequately protected if the worst should happen. Here are some points to consider when it comes to financial protection:
1. Save for that rainy day – having savings that are readily accessible in case of an unexpected event is a simple way in which to protect yourself. With the threat of redundancy more prevalent than before, building a cash reserve is sensible.
2. There’s more to cover than the mortgage – life and critical illness cover is conventionally applied for in conjunction with a mortgage, but remember it is equally important to protect your financial commitments, not just your liabilities from loss of earnings.
Putting in place protection to maintain your family’s current and future lifestyle (monthly bills, school fees and holidays as well as pension contributions etc.) would mean that daily life and retirement plans wouldn’t change financially for your loved ones if you were to become seriously ill or die unexpectedly.
3. Don’t forget your employee benefits – additional protection put in place can be arranged to dovetail with any employee benefits to which you are entitled, to make up any shortfall. For example, you may be entitled to Death in Service benefits, or long-term sick pay. It is important to find out what you are entitled to through your employer and that any (death benefit) nominations you have made in the past remain appropriate.
4. Policies in trust – holding protection policies in trust can speed up the process of paying benefits to your loved ones in the event of a successful claim. It can also ensure that those benefits paid remain outside of your estate where appropriate (for potential inheritance tax calculation purposes). Don’t forget existing policies can also be put into trust, if they are not already.
5. Financial protection through your limited company – directors can apply for life cover (payable to their loved ones) and protect their annual income (both salary and dividends) from serious ill-health, through their small limited companies and they are tax deductible! This approach can often be more tax-efficient than making similar, personal arrangements.
6. Cut-out the guess work. One of the main reasons why people put-off organising their financial protection is perceived complexity. We can help by creating a financial plan which takes into account what protection you already have, highlights any short-fall and points-out how to fill the gap as efficiently as possible.
7. Insurers aren’t the bad guys – the press may like to make out that insurers want to wriggle out of paying claims whenever they can, but according to the ABI**, 97% of life cover claims were paid out and 92% of critical illness claims in 2019. Key to this is the initial applications being completed correctly – we can help you with this too.
Even if you already have insurance in place, it’s always a good idea to ensure your policies are up to date. If not, they can easily be changed to accurately match your circumstances.
Give us a shout if you’d like more help.
*www.themoneypages.com, Jan 2020
**Association of British Insurers State of the Market Report 2019.