Financial Protection
In the dynamic landscape of personal finance, planning for the future requires a comprehensive approach. While investing and saving are pivotal components, it’s equally important to establish a safety net that protects you and your loved ones from unforeseen challenges. In this blog post, we’ll delve into the importance of three key insurance policies – Life Assurance, Income Protection, and Critical Illness cover, and how they play a crucial role in providing you with financial protection.
Life Assurance
Life Assurance is a fundamental pillar of financial planning. It pays out either a lump sum or regular income in the event of your death which gives your dependants financial support after you’re gone. This pay out can be used to redeem mortgages, pay off other liabilities or be used to provide for your family. Simply, Life Assurance ensures that your family is protected from the economic hardships that may arise following your passing.
There are two main types:
Term Assurance Policies
These run for a fixed period of time, known as the ‘term’ of the policy, such as five, ten or 25 years. They only pay out if you die during the policy.
There are three kinds of term policies.
- Level – pays as a lump sum if you die within the agreed term. The level of cover stays the same throughout. This is the most simple and affordable option.
- Decreasing – the level of cover reduces each year. It’s designed to be used with repayment mortgages, where the outstanding loan decreases over time.
- Increasing – the level of cover rises over the term of the policy, to keep up with inflation.
Whole of Life Policies
These pay out no matter when you die, as long as you keep up with your premium payments.
They’re often used to help towards a funeral or for Inheritance Tax planning.
However, they’re typically more expensive than shorter-term policies. There’s also a possibility that if you live longer than you expected, you could end up paying more in than you’ll get out.
Income Protection Insurance
The ability to earn an income is one of your most valuable assets. Income Protection acts as a shield, offering a financial safety net if you find yourself unable to work due to illness or injury. This policy provides a regular income stream, ensuring that your financial commitments, such as mortgage payments, utility bills, and other living expenses can continue to be met. It’s a proactive measure that empowers you to face life’s uncertainties without compromising your financial stability.
How does it work?
- Income protection provides regular payments that replace part of your income if you’re unable to work due to illness or an accident.
- It pays out until you can start working again – or until you retire, die or reach the end of the policy term – whichever is sooner.
- It typically pays out between 50% and 65% of your income if you’re unable to work.
- It covers most illnesses that leave you unable to work – either in the short or long term (depending on the type of policy and its definition of incapacity)
- It can be claimed as many times as you need to while the policy lasts.
There’s often a pre-agreed waiting (‘deferred’) period before the payments start. The most common waiting periods are 4, 13, 26 weeks and a year. The longer you wait, the lower the monthly premiums.
It’s not the same as critical illness insurance, which pays out a one-off lump sum if you have a specific serious illness.
Critical Illness Cover
Critical illnesses can strike anyone, at any time. The financial implications of a serious illness extend beyond medical expenses, lifestyle adjustments, and potential loss of income. Critical Illness cover provides a lump sum pay-out upon diagnosis of a covered condition. Therefore it provides financial flexibility to focus on your recovery without the burden of worrying about your financial obligations.
How does it work?
Critical illness cover supports you financially if you’re diagnosed with one of the conditions included in the policy. The tax-free, one-off payment helps pay for your treatment, mortgage, rent or changes to your home, such as wheelchair access, should you need it.
Critical illness insurance will pay out if you get one of the specific medical conditions or injuries listed in the policy. It only pays out once, after which the policy ends.
Examples of critical illnesses that might be covered include:
- stroke
- heart attack
- certain types and stages of cancer
- conditions such as multiple sclerosis
- major organ transplant
- Parkinson’s disease
- Alzheimer’s disease
- multiple sclerosis
- traumatic head injury.
Conclusions
In summary, these insurance policies provide you with peace of mind and financial protection. They provide stability to your overall financial plan, and help keep your plan on track should the worst happen. By integrating these policies into your financial plan, you not only safeguard your present but also pave the way for a secure and resilient financial future. Contact us today to embark on a journey towards financial peace of mind.