Protecting Your Family Guide
Protecting what matters most
We all want security for our family’s future, a way to maintain the financial stability we work so hard for. That’s why it’s important to plan for eventualities we hope will never happen.
Insurance cover to protect your loved ones in the event of serious illness, injury or death is never a pleasant exercise – but that doesn’t make it any less important. The implications of not doing so can cost our loved ones dearly. Fortunately, it can be quite simple to arrange the cover that can give you peace of mind. This guide will help you to understand the main forms of protection available to you and how they can help you.
Covering your bases
There are several ways to protect your family finances depending on what’s most important to you. To simplify things, consider the follow scenarios. What would be the financial implication of these events?:
- Your death
- Your partner’s death
- Illness or injury which prevented you or your partner from working in the short to medium term
- Serious debilitating medical condition that prevents you or your partner working ever again
- Involuntary unemployment & redundancy
Without adequate protection in place, the financial implications of these could prove devastating.
How much do I need?
Getting the right amount of cover is important for obvious reasons, at the same time, you will likely have a budget in mind set aside to pay for the cover you need.
Policy Types & What They Can Do For You
There are several different types of policy available which may at first seem overwhelming and confusing. We have written several guides to cut through the jargon and break-down the options. A summary of the main types are listed here:
Life Insurance – Will pay out death to clear your mortgage and other debts. It can also – or instead – provide a cash lump sum to your dependants.
Family Income Benefit – Also pays out on death but is designed to provide a regular monthly benefit to your family. It can pay for day-to-day living costs and child care or school fees.
Critical Illness Cover – Provides a tax free lump sum that can be used to pay all or part of your mortgage, outstanding debts, living expenses, private medical care, nursing costs and alterations to your car & home. Many Critical Illness Cover policies also include up to £25,000 lump sum payout for children’s illnesses under the parent’s policy. This benefit is free of charge and separate to the sum assured benefit covering the policyholder.
Income Protection – Provides a regular, tax free income if you are unable to work due to illness or injury. It starts paying from the set deferment period until you recover or the age you set from the start. It’s correct name is ‘Permanent Health Insurance’.
Accident & Sickness Cover – Similar to Income protection but will only pay for a maximum of 12 or 24 months. There are standard exclusions to consider and some policies require you to have a mortgage in place. Invariably less comprehensive than Permanent Health Insurance (Income Protection) but can prove a reasonable alternative, depending on your circumstances and budget.
Unemployment / Redundancy Cover – Provides a tax free income for up to 12 months if you are made redundant. Some policies will protect self employed individuals in the event of business failure (without the need to declare bankruptcy).
Count Your Costs
It may sound obvious but often a good way to ascertain how much cover you need is to add up your normal monthly outgoings now, in order to calculate your committed financial obligations. Remove from that figure whatever income would be lost due to the eventuality you wish to protect. The difference between these two figures, minus whatever state benefit or employee benefit you would be eligible for, gives you a shortfall to insure.
If you have any questions about these options, have a read through our guides and don’t hesitate to get in contact with us, one of our friendly experts will gladly talk you through your choices – entirely without cost or obligation.