Family
Protection

For many people, life’s journey will take a fairly well-worn path. From education to starting their first job, on to progression through the working world. It may also include marriage, children, property purchase and retirement. It will inevitably also include death and perhaps illness and disability along the way.

It is a horrible thing to think about, but protection is one of the most important areas of financial planning that a family can consider. And there is much to consider: is it necessary? what types of insurance are there? what do they cover? how much do they cost? and so on.

The main areas of protection that we help our clients with are death, disability and critical illness. Here, we will consider the main questions that a client may ask.

What is Family Protection?

In the instance that you may become ill or disabled and therefore not be able to continue working, critical illness and disability cover can provide income and/ or a lump sum payment to you and your family. This is used to replace a proportion (or all) of your current income, in order that you and your family can continue to live a comfortable life.

In the event of death, a life insurance policy would normally pay out a lump sum to your chosen beneficiaries. Life insurance comes in two types;

  • Term insurance provides cover for a specified period of time. You choose the maturity of the plan and this normally coincides with the end of financial obligations, perhaps once you reach retirement and have a pension paying income to you instead of your employer. It may also be used to cover the cost of a home loan. Term insurance may also contain an invested element, such that if you were not to die, it will still pay out benefits upon maturity.
  • Whole of life. This policy will always pay out benefits upon your death, provided that you maintain the premium payments throughout the policy.

All types of cover are aimed at protecting you and your family should the worst happen. There are many variants of such cover, which is why we really emphasise that you seek professional assistance.

What Should I Consider?

Everyone’s individual circumstances vary. Thus, there is no easy formula that someone can follow to find out what and how much coverage they may need. Add to this that there are many types of family protection available and getting the right provision in place can seem daunting. However, there are some major areas that we can contemplate:

The first thing to consider is whether there are other people in your life that rely on your income? A partner/spouse, children, family members etc – anyone whose life would be drastically affected if you were unable to support them through your earning of income.

I have no dependants: In this case life insurance may not be a top priority at the moment. However, there would still be the question of illness and disability coverage. If you were unable to work, for any reason, how would you continue to live a comfortable life?

I do have people dependant upon my income: In this case we would normally suggest looking at the full suite of coverage available: death, disability and illness.

Once you have worked out what combination of cover (illness, disability and/or death) you need you will need to calculate how much of each type of cover is required and for how long. This is again individual specific.

The main things to consider will be whether you require a regular payout (in lieu of salary for example) or a lump sum. Then we must work out how much you will need. This normally involves looking at your current income minus your ongoing costs and determining just how much money you would need to receive were the worst to happen.

It is very possible that you will already have some coverage in place, be it from the government, your employer or possibly included in other insurance policies you own.

It is important to first check what cover you already have before buying additional insurance. On top of this, you should also consider your overall wealth. Then by adding the two together you will be able to work out if your family would have enough protection given a worst-case scenario or whether you would be wise to take out additional insurance coverage.

Peace of Mind

Prudent financial planning can be the cornerstone to a family’s happiness and well-being. It allows a family to understand their income versus expenditure so that they don’t overspend and end up in a debt cycle. It allows them to plan for the future – buying property, educating their children, starting businesses, retiring in comfort and passing benefits upon death in an efficient manner. It also allows them to protect against the worst – illness, disability and death.

Protection is one of the most important elements of financial planning that any family can consider. It is an area that we have extensive knowledge and expertise on. We also have the advantage of being an independent advisor, such that we can research the whole market on your behalf to find the right solution for you. Please get in touch for further detailed information and assistance in calculating what you may require.