2017 Resolutions – Protect yourself

Dry January, workout plans, the latest fad diets and sifting through your bank records searching for new ways to save money. ‘Tis the season to be thrifty and focus on a new you for a new year; however, an often overlooked way of planning for the New Year is protecting you and your loved ones against the unexpected.

We are all quick to insure our most prized possessions, be it phones, laptops, watches, jewellery or TVs for fear of losing or breaking them. Yet bizarrely, many of us are guilty of not placing as much stock on our own wellbeing and how this can affect those closest to us. It is estimated that nearly one in five UK adults who have a financial dependent do not currently have a life insurance policy in place[i].

During our meetings with clients we always make sure to ask the tough questions, including “What would your financial dependents pay the bills with if you were to die tomorrow?” Whilst this can strike some people as a touch abrupt, it is a scenario that most of us don’t want to consider, which often leads to insufficient plans being made for this eventuality. For those with considerable outstanding mortgage balances, loans or other liabilities, dying unexpectedly could leave your surviving dependents with the unenviable position of having to sell their home or assets during an already stressful time to pay the bills.

Another scenario that is often overlooked is that of being unable to work due to illness or injury. Consider for a moment that you are unable to work for a period of six months. The statutory sick pay is currently £88.45 per week and is payable for a total of 28 weeks. Would you be able to cover your mortgage payments, bills and living costs on this much each week?

There are various types of policy available to cover such eventualities and each has its own specific features, benefits and drawbacks. Critical illness cover can offer a lump sum in the event that you are diagnosed with a serious illness from the policy provider’s predetermined list, although it does not provide any benefits in the event of an accident. Another option is an Income Protection policy that will pay a regular income if you are unable to work due to illness or injury. This is designed to replace your salary and can be paid alongside statutory sick pay, albeit up to a limit of roughly 55% of your normal earnings.

Quite often clients come to us with protection policies that have been setup directly with insurance companies or through banks during their mortgage application process. Whilst these policies can provide the required cover, the cost of this benefit can be high and does not factor in other plans that may already be in place. There are many other forms of financial protection that can be implemented and these do not always require an insurance policy. Perhaps retaining an emergency cash balance to cover any short term expenditures is sufficient or you have enough liquid assets to pay off any outstanding liabilities in the event of your death.

Protection is an area that we assess as standard during our comprehensive lifetime cashflow planning process, taking all assets, liabilities and our clients’ objectives into account before coming up with a suitable solution. If you would like to start the New Year by making sure you and your loved ones are protected, please do get in touch with us as we are always happy to help.

[i] http://www.moneysupermarket.com/hubs/life-insurance/life-insurance-survey/

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