Protecting your family financially
Whilst it is not a prospect anyone wants to consider, most families especially those with young children will have a need to protect themselves financially against death, long term illness or injury. In this short article John Skillett, Financial Adviser at Gower Financial Services, looks at the importance of Life Insurance, Critical Illness and Income protection.
Financial Protection is the very bedrock of financial planning. However, with families having many other priorities like paying the mortgage, household bills, saving for a pension, all before thinking about entertaining themselves or going on holiday, it is easy to see how it can become overlooked. Although no one wants the worst to happen, it is essential that families consider the financial consequences of one of them being unable to work over the long term or dying.
A life insurance policy can provide you with the security that in the event of death, things such as mortgages, funeral costs, or lost income can be settled or replaced with minimum fuss and not left as a burden on remaining family. Policies can also be used as a way of leaving lump sums or regular payments to families to help them cope with the financial impact of losing a loved one. All of which can provide invaluable peace of mind for families and real comfort in times of duress.
Case Study: Following a financial review with a married couple with children; the clients realised that they would struggle financially if anything were to happen to the husband, as he was the main family earner. They subsequently applied for and put in place a life insurance and critical illness policy. Soon after the husband was diagnosed with Leukaemia, which became terminal. Upon the Terminal diagnosis the life insurance policy paid out a lump sum to the family because he wasn’t expected to survive for longer than the next twelve months. Not only did this payment provide the family with long term financial security, it meant that they were able to go on that one last holiday and spend as much family time together as possible before he finally passed away. Whilst a payment from an insurance company will never make up for the loss of a loved one, it can prevent financial woes compounding the situation. In this case I know what a profound impact on the survivor’s lives the payment had, so if there was any solace to be taken from it at the time, then it was that they had had the good sense to put this policy in place.
Critical illness cover can provide a lump sum to individuals and their families, in the event of one of them being diagnosed with a serious illness. These policies generally cover, amongst other things, conditions like cancer, heart attack, stroke, MS, total permanent disability and can also cover various child related conditions. Cover provides peace of mind that should the life assured be diagnosed with a critical illness listed within the policy, then they would potentially receive a lump sum of money which could help ease the financial burden of things like mortgages, loans, loss of income, everyday family expenses and child care etc. whilst the life assured tries to recover from the illness. Critical illness cover is particularly effective when combined with income protection cover.
Income protection policies provide a replacement monthly income for someone who cannot work due to long term illness or incapacity. Income Protection cover is designed to protect a portion of an individual’s annual income and is a very important part of financial protection provisions, particularly for those that are self-employed and don’t receive any sick pay.
It is important to review existing policies from time to time to ensure that the level of cover remains appropriate and that the premiums are as cost effective as they should be. If you’ve had existing life insurance policies in place for some time then it would be worth talking to one of our adviser today to ensure that the cover still meets your needs.
Prioritise financial risks
In an ideal world an individual or family would have all of the above and hopefully cover every eventuality. However, we understand that families need to prioritise their spending, so at Gower our expert advisers asses each client on a case by case basis and tailor cover to meet a client’s individual needs and objectives, whilst also keeping the costs within any specific budget.
The aim is to give families the peace of mind that they are financially protected should the worst happen, whilst striking a balance with the other demands of raising a family.