- Work Hard
- 11th Sep 2024
- 0
- 8 minutes
Are you more likely to insure your phone than your income? Here’s why personal insurance matters
By April Parrish
Raising awareness of the importance of personal insurance and building it into your family’s finances.
When I meet with a client, and we start building their financial plan, people are naturally most excited about saving for the future and how they will spend their time in retirement. But it’s important to first look at any circumstances that could prevent them from reaching those goals. We call these the bumps in the road. Quite often, these are the concerns that are keeping them up at night.
What would happen to your family’s lifestyle if you or your partner couldn’t work? How would your family manage financially if you or your partner died? Could your family cope financially if your child suffered a serious illness and you were taken away from work to care for them or they needed expensive treatment or equipment?
Financial worries can significantly impact mental health. They can lead to sleep problems, low self-esteem and increased risk of depression and anxiety.
These days, we protect our homes, our cars, and even our mobile phones. But getting the right insurance is not just about protecting your assets. It’s about looking after the people that matter most to you.
Taking time to future-proof your family’s finances now can make a real difference to your financial well-being and that of those you care about, both now and later in life.
Let’s start with protecting your loved ones in the event of death.
Life Insurance
If you have people financially dependent on you, such as a spouse or children, life insurance gives you the peace of mind that they will be taken care of if the worst happens. Any debts such as mortgages or large loans would be reclaimed from the deceased’s estate, so protecting them with appropriate life insurance means the full value of your assets can be passed to your loved ones.
Often, clients think of protecting their mortgage as the main goal of life insurance, but there are other things to consider. When one partner dies, the household bills still need to be paid. Would one income be enough to financially support your family with money to live on and the other day-to-day expenses? You might also wish to leave a legacy to fund school fees or university or enough for a house deposit.
If only one of you earns an income, it could be tempting to decide to insure only one life, but the financial implications of a caregiver’s passing could be significant. The financial burden of childcare costs or the care of an elderly relative could be high, so this should also be taken into consideration.
Life Insurance is designed to pay either an income or a lump sum when you die during the policy’s term. There are various types of life insurance coverage to choose from, and it’s important to seek advice to select the most suitable one for your circumstances.
Now, let’s look at how you would cope financially if you were ill or injured and couldn’t work.
Products such as Income Protection and Critical Illness are designed to help lighten the financial load and make it easier for you and your family to cope at a time when you need to concentrate on getting better.
Income Protection
Income Protection is a long-term sick pay product. It’s natural to strive for a certain lifestyle to help us make the most of our free time and give our families the life they deserve. But if one partner becomes ill, the loss of an income can put our lifestyle in real jeopardy.
Misconceptions such as, “I’ve never had time off work, and I don’t expect to”, “I’ll claim state benefits,” or “I’ll rely on my savings” often drive behavioural biases.
To look at the stats, the average weekly expenditure of a household is around £554.401 , therefore being left to rely on Statutory Sick Pay (SSP) of £116.751 (2024 / 2025 tax year) per week can plunge families into real financial difficulties. SSP also only pays for 28 weeks, while the average Income Protection claim pays out for five years and 10 months. According to the 2024 UK Savings Statistics, 65% of us wouldn’t even be able to last three months with no income2. How long would your savings last for?
Income Protection provides a set income to allow you to meet your expenses until either you return to work or the policy term ends. You can sync the payments in line with any sick pay you are entitled to from your employer and it can also include benefits such as rehabilitation services, second opinions and 24/7 GP Services, helping you get back to work quicker.
Critical Illness Cover & Children’s Critical Illness
Critical Illness Cover is a type of insurance that’ll pay you a tax-free cash lump sum if you’re diagnosed with or require surgery for a condition that is defined in your insurer’s policy. It might help you pay for private medical care, or to see a specialist consultant. It could even pay for specialist equipment or alterations to your home.
Many people are not aware that you can also cover children for Critical Illness.
Often, we think about the impact on our finances if we became ill, but equally, if our children became ill, that is not a time to be worrying about money. As a parent myself, if one of my children became seriously ill, I would be by their side comforting them and helping them get better. I wouldn’t be able to work, but the bills would still need to be paid.
Children’s Critical Illness provides a lump sum benefit which can be used to support your family financially over time, to access treatment or equipment not available on the NHS and to generally put your mind at rest that, if the unthinkable happens, you have a cushion to fall back on.
Children’s Critical Illness can be added to single life insurance policies, even if you don’t want Critical Illness Cover for yourself.
If you have children, Children’s Critical Illness Cover can be seen as an essential.
Top Tip: Not all Critical Illness Cover is equal, and cheaper is not usually better. If you are paying for Critical Illness Cover, book a protection review with a Financial Adviser to ensure the cover suits your needs and you have the level of protection you think you do.
A heightened need for protection.
We know, though, that we still face a challenging environment. The squeeze on people’s incomes and the economic and health volatility of the last few years, has both heightened the need for protection but also meant more people are inclined to cut back on insurances. The reality for many UK households is that they face the risk of serious hardship if they were to experience a financial shock, such as a loss of income due to the death or ill-health of a partner.
You don’t have to have complicated circumstances to benefit from the help of a Financial Adviser. Financial Advisers are focused on delivering the best financial outcomes for you and your family.
It’s true that we can buy so many things ourselves online now, from flights to holidays, pizzas and fridge freezers without having to go through a middleman. But when it comes to something as important as our finances, it can pay to go to an expert.
Take a look at the link below to see how likely you are to need any of the above covers before you reach retirement.
Please note that clicking a link will open the external website in a new window or tab. Links from this post/website exist for information only and we accept no responsibility or liability for the information contained on any such sites. The existence of a link to another website does not imply or express endorsement of its provider, product or services by us or St. James’s Place.
If you want to chat more about your circumstances or to review your current protection, I’d love to hear from you. You can call me on 07738412918 or email me on [email protected]
- Office for National Statistics: Family spending in the UK: April 2021 to March 2022. Published 31 May 2023
- UK Savings Statistics 2024 – Saving Facts and Stats Report (25 / 07 / 2024)
Emerald Associates Ltd is an Appointed Representative of and represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Group’s wealth management products and services, more details of which are set out on the Group’s website www.sjp.co.uk/products. The ‘St. James’s Place Partnership’ and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives. Emerald Associates is a trading name of Emerald Financial Associates Ltd.
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