The importance of financial protection

No-one likes to think about the worst happening.

But preparing just in case it does can be life-changing.

For example, how can you keep up repayments on a mortgage if you become ill, are unable to work or if your partner dies?

I was reminded of this at a recent mortgage industry event where we heard some frightening statistics about how underserved we are as a nation when it comes to financial protection.

What is financial protection?

Financial protection comes in many forms, but the most common ones are:

Life Insurance

This is where money – usually a lump sum – is paid after the death of the person insured.

Critical illness cover

This is where money – usually a lump sum – is paid out in the event of the diagnosis of a pre-defined illness, typically more common conditions such as cancer, a stroke or a heart attack.

Income protection

This is where money is paid out, usually monthly, to cover some of the salary lost due to someone being unable to work for a prolonged period of time.

Who needs financial protection?

People taking on a long-term debt such as a mortgage would be well placed to consider financial protection.

Talking to a financial adviser can help you decide which form of financial protection is best suited to your situation and financial goals

Financial protection and families

One aspect of financial protection which is often overlooked is how it can help when other members of your family suffer a misfortune.

For example, if you child is seriously ill, you may need time off work to support them through their treatment.

Does your contract that you have at work cover you for when you’re ill, and if one of your children is ill?

Financial protection in real-life scenarios

This kind of situation is not hypothetical – at the mortgage event, one member of the audience told how her niece became seriously ill and the family were worried how they would cope.

After checking the protection policy, they found there was enough cover for her brother-in-law to take time off to be in hospital with their daughter as she recovered.

The couple were thankful that they had been advised on the policy and couldn’t have been more grateful that it allowed finances and fear of losing their home to be something they didn’t have to worry about at all.

I’ve heard from other advisers about how they have helped clients during reviews to claim on their policies following serious illness suffered by their children.

In all these cases, the policies allowed financial burdens to be lifted and the real threat of not being able to pay the mortgage to be removed.

Putting this cover in place allowed people to keep their jobs with sabbaticals and ultimately be there for their kids during unthinkable times.

Are you and your family protected?

Think about your situation: are you protected financially?

Do you have a family that could benefit from a conversation with a professional of how to protect what matters most to you?

Do you have a policy that needs reviewed, perhaps since you have had children?

How an adviser can help

These topics are not always easy to talk about – no-one likes to consider worst case scenarios.

But being brave enough to have the chat could be one of the best decisions you ever make.

Talking to an adviser can help you look carefully at your situation, decide what needs to be done and how best to approach things.

It could be one of the most important conversations you ever have.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR OTHER LOAN SECURED AGAINST IT.

Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. A recommendation will be made only following a full assessment of your personal circumstances. Protection insurance is designed to provide financial support on death, illness or inability to work. It has no cash-in value and is not a savings or investment product. All policies are subject to terms, conditions, exclusions and limitations. Full details will be explained before any policy is taken out. For income protection and critical illness cover, payment of benefits is subject to meeting the policy conditions and insurer underwriting and claims criteria. Always seek professional advice before making financial decisions.