Did you know that people are twice as likely to take out insurance for a pet than they are themselves? This is a choice which could have server financial consequences.
In a survey by Cirencester Direct, over a third of respondents said they have, or would take out, pet insurance. However, just 17% would take steps to protect themselves through purchasing Income Protection. It is a similar picture with other types of insurance.
You probably took out home & contents insurance without a second thought. It is something that can offer you peace of mind. But did you also consider getting critical illness cover or life insurance? Whilst personal protection is often at the back of peoples minds it can improve your financial security and confidence in the future.
It will never happen to me
The truth is over your lifetime, an accident or illness is likely to have an impact. For example, look at the three illnesses all critical illness policies must cover:
- Cancer: Every two minutes someone in the UK is diagnosed with cancer and it is estimated 50% of people get it during their lifetime.
- Heart attack: Heart and circulatory diseases cause more than a quarter of all deaths in the UK and there is a hospital admission due to a heart attack every five minutes in the UK.
- Stroke: Strokes are the fourth single leading cause of death in the UK and someone experiences a stroke every five minutes.
Despite the startling figures, more than eight in ten (81%) of UK homeowners don’t have any form of over to protect their income.
How does financial protection work?
Under certain conditions, a financial protection product will either pay out a lump sum or regular payments. If something happens to you, it can help plug the gap between your income and outgoings.
How and when a policy could payout depends on what you opt for. All involves paying premiums which are usually monthly. How much these are will depend on the provider, you and your lifestyle.
There are three main types of financial protection policy:
A life insurance policy pays out a lump sum on your death. Taking out the right policy for your circumstances could help your family pay off the mortgage or fund school fees during a time of great stress.
Thousands of people suffer from a critical illness every year. Critical illness cover will pay out a lump sum on the diagnosis of certain illnesses noted in the policy. It can give you the financial headroom to terms with the diagnosis if you are unable to work or make adaptations.
This type of policy will pay out if you are unable to work due to an accident or illness after a certain period. It will pay out a portion of your usual salary, say 70%, on a regular basis until the policy term finished, or you return to work. The income can help you keep up with financial commitments even if your usual wage is not coming in.
How do these policies fit into my financial planning?
We do not look at protection products in isolation. Instead, they form an important part of the bigger picture. It should fit into your plan alongside an emergency fund and the benefits your employer may offer.
When we are creating a financial plan, one of the things we ask is ‘what if?’ No one wants to think about the bad things which could happen to them and how they could affect their financial future. However, it is an essential step which can help you understand how resilient your finances are.