Do One Thing - Financial Protection

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Financial Protection is essentially a type of insurance. It’s a range of products which cover you in case you find yourself unable to work for an extended period, or facing a sad situation like a partner dying.

I’m writing this because financial protection tends to be the unloved bit of personal finance – whilst savings and investments get a lot of focus, protection tends to be an afterthought.

I often think this for the same reason that important factors like a will don’t get the same level of attention from us all – it’s quite a gloomy subject, and we really don’t like thinking about ourselves in the context of death or injury, even if we know deep-down it’s sensible to plan for it. 

It’s on my mind because as a recently married man, my family situation has changed, so I’ve been reviewing my own coverage here!

It’s really important not to fall into the trap of assuming it’ll never happen, and instead of being comfortable, we have a plan for the low risk it does.

Not everyone does need Financial Protection and it won’t be worth it to everyone. A sensible first step is to think about what your monthly “must pays” are, and how comfortably you’d be able to meet these if your own income was removed.  

It’s also sensible to think about your own general health and age, as unfortunately both our obligations and potential health issues can start to mount up as we get older.

I think key life events like marriage, birth and major milestones where your family structure changes are really sensible points to do a review of protection.

Life Assurance: Life Assurance generally pays a lump sum (some products pay a regular income) to your family in the event of your death.

You can also get a variant of this, which will pay you in the event of your spouse dying, or joint policies that cover the other in event of death.

Critical Illness Insurance: Will pay you a cash lump sum in the event of being diagnosed with a critical illness, such as cancer.

Disability Cover: Will pay you a monthly income if you find yourself too injured to work. Policies can differ here for if it’s to do the same job as you do now or a different job, so you need to check the detail.

Often these will also come with additional support for rehabilitation if your disability isn’t permanent (it’s in the insurance company’s interest to get you back to work as quickly as possible!)

Personal Accident Cover: Similar to the above, but covers you with a lump sum in the event of various specified injuries occurring.

The above products can have different names in some cases – most commonly you may also see these referred to as income protection products or family income benefit.  

If you work for a company, it’s definitely worth investigating the benefits package on offer to see if protection is part of the options you can choose. This can often be the cheapest as companies buy the policies en-masse and get substantial discounts to effectively insure across a group of people.

Beyond that, we’d suggest starting with popular comparison sites to understand the products on offer and their relevant pricing and do research on the companies within.

If you’re unsure about what you might need and want some guidance, this is an area it may be worth discussing with a financial advisor as part of longer-term planning.