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Why protection and financial planning go hand in hand

9th November 2021

Since the initial outbreak in Spring 2020, the coronavirus pandemic has changed our lives in a variety of ways. One of the most important lessons that we’ve learned in recent months is that you never know when the unexpected might happen.

If you want to build long-term financial stability, one of the most useful ways you can do so is by finding the right type of financial protection for your needs. This can help you to absorb and overcome financial obstacles.

A recent study, published by FTAdviser, showed that the pandemic has prompted more than half of people to re-evaluate how they protect their financial future. If you want to ensure your long-term stability, read on to found out how protection and planning go hand in hand.

Protection can help you to absorb short-term financial shocks

As much as we might try to prepare for the future, it can sometimes catch us unaware. The pandemic is one of the best examples of this as, back in January 2020, nobody could have predicted how it would impact life in the UK over the ensuing months.

Likewise, on a personal level, you can never know when an unexpected change might impact your life. While you probably already have an emergency fund in place, this may not always be enough.

For example, consider the possibility that you suffer an injury that leaves you unable to work. While your company may offer sick pay, it may only last for a few months and you may not be well enough to return before it ends.

Additionally, Statutory Sick Pay in 2021/22 is just £96.35 a week, which is unlikely to be enough for you and your family to live on.

This can pose obvious problems, especially if you have ongoing financial commitments like mortgage repayments or education fees for children or grandchildren.

If this happened, you may have to dip into your savings in order to make ends meet. While this can help you in the short term, it can significantly impact your wealth in the long term.

This is where having income protection could help you, as it pays out a portion of your salary after an “excess period” of your choosing. These payments typically continue until you’re well enough to return to work or until the end of the policy period.

Income protection usually covers most illnesses that leave you unable to work but there are some exceptions to this so it’s important to read the terms of your policy thoroughly.

Protection can give you greater confidence in your plans

If you get diagnosed with a serious illness, it can be emotionally devastating. At a time when you should be thinking about recovery, concerns over money are the last thing you need. This is where critical illness cover can help.

Unlike with income protection, critical illness cover will pay you a lump sum, rather than a monthly amount, when you are diagnosed with a serious illness. You can then use this to pay for private medical care, to repay your mortgage, or maintain your current standard of living if you need to take extended leave from work for recovery.

Please bear in mind, though, that the definition of a critical illness often varies between providers, so make sure to read the terms of your policy so that you know what you’re protected against.

Having protection in place can give you greater peace of mind to know that even if you are diagnosed with a serious illness, it wouldn’t disrupt your long-term plans.

It can help to ensure the financial stability of your loved ones

A final way that financial protection can help you is with your estate planning. While nobody likes to think about the prospect of passing away, it’s important to plan ahead.

If you’re the main earner in your household, your death could have a significant impact not only on your partner’s retirement plans but also on your loved ones’ financial futures. This is where seeking protection can help.

Many couples do their financial planning together and an unexpected passing can significantly affect this. Having life insurance in place can help to ensure that your partner won’t have to experience a lower quality of life when you die.

Furthermore, protection can also be invaluable for protecting any inheritance that you want to set aside for your loved ones. A life insurance payment can help your family to cover any Inheritance Tax liabilities when you pass away.

Having protection in place can be invaluable for preserving your family’s financial wellbeing, even if the worst should happen. There are several different types of life insurance that you should consider, so if you want to know more about which is right for you, you may benefit from seeking financial advice.

In life, you never know when the unexpected may happen. If you want to be prepared for when it does, finding the right form of protection for you can be invaluable.

Get in touch

If you want to find out more about which types of cover could benefit you, we can help. Please email enquiries@pilgrimfp.co.uk or call us on 01749 670087.


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