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26% of people without financial protection would like it. Here’s what you need to knowPublished: November 3, 2022 by Jennifer Armstrong
Financial protection can provide valuable security when times are tough. Research from LV= suggests that many people that don’t currently have protection in place would like it. Here’s what you need to know.
Nearly 1 in 5 people admitted they would struggle to pay their mortgage or rent if they couldn’t work for two months.
With many families just one shock away from financial challenges, it’s not surprising that 26% of workers that don’t have financial protection say they would like to have it.
When asked, 60% of 25- to 44-year-olds said they would feel more financially resilient with protection. The findings demonstrate that workers recognise the value that protection can provide, even if they haven’t taken steps to protect themselves yet.
If you don’t have financial protection in place, you should consider how well you’d cope if you faced a financial shock, such as losing your income or facing an unexpected bill.
Read on to learn more about financial protection and how it could add value to your plan.
The 3 main types of financial protection you should consider
There are three main types of financial protection that you should consider, as they can add value in different circumstances.
- Income protection: This would provide you with a regular income if you were unable to work due to an illness or an accident. It will often provide a portion of your usual salary until you return to work, retire, or the policy term ends.
- Critical illness cover: If you were diagnosed with a critical illness named within the policy, this would pay out a lump sum. This money can provide you with a financial safety net if you cannot return to work or need to make lifestyle changes.
- Life insurance: This type of policy can provide your dependents with financial security. If you passed away during the policy term, it would provide your loved ones with a lump sum that they could use how they wish, from paying off a mortgage to creating a long-term income.
If you’re weighing up which type of financial protection could be right for you, answering these three questions can help.
1. How financially resilient are you?
Before you start reviewing different types of financial protection, take a step back and review how financially resilient you are now.
- What income do you need to cover basic expenses?
- How much do you have saved in an emergency fund?
- If your income stopped, how long could you cope?
It’s a process that can help you understand what situations could place you under financial strain, and then create a plan to build security.
2. What protection do you already have?
Even if you haven’t taken out financial protection directly, you may have some in place that could provide you with security when you need it most.
Workplace benefits are a good place to start. Does your employer offer a sick pay policy that would provide you with protection if you were ill in the short or medium term? Or does your employer offer life insurance for employees that can provide peace of mind for your family?
Employer benefits don’t mean you should discount taking out additional protection. But understanding what you already have can help you identify gaps and choose an option that will complement it.
If your employer would pay your salary for six months if you were ill, you may decide to choose income protection with a six-month deferment period. This means it wouldn’t overlap with your employer’s policy and could reduce your premiums.
3. Do you have any dependents?
If you have loved ones that are financially dependent on you, it’s natural to worry about how they’d cope if you couldn’t work.
As a result, you should include them when assessing your financial protection. It’s a step that can help you provide long-term security to the people that matter to you the most.
You may want to consider financial protection that would pay out if you passed away. While it can be difficult to think about, it can also give you peace of mind.
Talk to us about how to improve your financial resilience
Financial resilience can give you confidence and improve your mental wellbeing. As well as financial protection, there may be other steps you can take too. Please contact us to discuss your finances and what you can do to protect yourself from shocks.
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.