Financial protection is a subject that many people fail to consider. This is partly down to the fact that they are often unaware of it and what it means, but also in many cases they simply do not wish to think about it.
The term ‘financial protection’ refers to products such as various insurance policies that are designed to safeguard an individual, a family or a business if something happens to them. Because that ‘something’ often refers to serious illness or worse, it is not a subject that people like to dwell on, but it is important to consider it in case the worst happens.
In this article, we will be looking at some of the forms of protection that are worth talking about with financial planning services in Chester or wherever you are based.
What if you do not have any protection?
Should you not currently have any financial protection, three types in particular will be of critical importance. We all think that we will not fall victim to an illness or accident that prevents us from working, but none of us know what is around the corner. Most people would find it difficult to support themselves without the income from work. This is where protection becomes vital to avoiding financial catastrophe.
What are the most important forms of protection?
Life insurance
A life insurance policy is something that you should definitely look into if you have family members who depend on you, such as a spouse or children. It is a type of protection that pays these dependants a sum of money should you die, with the amount paid varying based on the policy and the size of the monthly premiums. It is an unpleasant subject to consider, but most people who have families will want to make sure that they are looked after in the event of a tragedy.
This can assist them with day-to-day expenses, including mortgage payments, and can be invaluable in providing both you and them with greater peace of mind.
Income protection
Whereas life insurance is meant to support your family should you die, income protection is intended to ensure that you have money coming in if you suffer injury or an accident that leaves you unable to continue working. A typical income protection policy will come with what is known as a period of deferment, which is a delay between the accident or illness occurring and the start of the payments. This period can range from a few weeks to several months and is something that you should discuss with a financial advisor before choosing a policy. Your advisor can help you pick one with a deferment period that you can cope with, based on your economic circumstances.
The amount received through income protection will depend on your earnings prior to the accident or illness. It usually pays around 70% of your monthly salary and can continue over a long period of time.
Critical illness protection
This has some similarities with income protection, as it involves a payout if you fall victim to serious illness that prevents you from working. The biggest difference between the two is that this payment is a one-off lump sum, rather than smaller long-term payments. Many people find critical illness protection to be useful in paying off debts such as healthcare bills, but if it is to be used over a longer period, the money will have to be managed carefully.
Whether to opt for this, income protection or both is something to discuss with an advisor.
Are there other types to consider?
Business protection
Whereas the three products referred to up to now are about safeguarding you and your family in the wake of sudden accident, illness or death, business protection does that for a company. A business protection policy will provide a firm with an ongoing income stream if either the owner or members of staff fall victim to one of those things.
It is a way of ensuring that the firm has a chance of surviving the difficulties that such a scenario presents. If you have your own small business, a financial advisor might well encourage you to take out a business protection policy alongside the personal ones to make sure that you do not lose it if you fall seriously ill or are in an accident.
What else is there to think about?
Another issue related to protection that you should raise with a financial advisor is any existing policies you might have. You will want to make sure that additional ones complement them and are not superfluous. The actual policies that you sign up for from the ones listed here will be based on your circumstances, as well as the costs of the various premiums.
Speak to a professional financial advisor for more protection guidance.
