It always pays to expect the unexpected. Accident, illness, or tragedy can strike at any time. That’s why financial protection is so important.
Protecting your income and your family if the worst happens to you is both the foundation for your long-term plans and the scaffolding that holds the whole thing together.
And yet, COVER magazine recently reported on a worrying gap in life insurance provision across the UK. While more than 14 million households have at least one dependant, nearly 8 million (57%) don’t currently hold enough life cover to protect themselves or their family.
For many, the issue isn’t affordability and the gap could be easily closed. Keep reading to find out how, and why now is always the right time.
COVER magazine highlights a protection gap that around 2.4 million UK households can afford to close if they choose to
Your financial plans are based on long-term goals that could be decades in your future. A lot can happen in that time.
While life milestones like births and marriages can change your priorities, other events – like an accident, illness, or death – can provide a huge financial shock. Knowing that your lost income is covered or that your surviving family can afford to keep up with mortgage repayments can give you peace of mind.
And yet, millions of UK households are failing to protect themselves.
The figures published in COVER magazine confirm that the gap in cover across UK households with at least one dependant is £89,800. This amount, though, rises to more than £194,000 for homeowners with children.
On average, the cost to close the gap is just £134 a year. So, can you afford not to?
3 financial shocks that will make you glad you have the right protection in place
1. An accident or illness could cut off your income
While it isn’t something any of us want to think about, a serious accident or illness can strike at any time.
If you were unable to work for an extended period, would your household be financially secure enough to keep up with mortgage and utility payments? If not, you might want to consider how to cover this potential lost income now.
Income protection can provide a monthly payment if you’re forced to stop working due to an accident or illness (although you’ll likely find that it won’t cover redundancy).
The amount you receive – after a deferral period that varies between policies – will be less than your full salary but enough to help you and your family manage while you get back on your feet. The money could help to cover the cost of groceries, mortgage payments, or utility bills.
Accidents and illnesses can arrive out of the blue, causing worry for your loved ones. Financial issues, though, could cause added stress. Consider income protection and you’ll have peace of mind that a future shock won’t derail your plans.
2. If you’re diagnosed with a critical illness the effects on your finances could be more long term
A critical illness diagnosis can come as a huge shock, presenting physical, emotional, and financial challenges for you and your family. While the initial news might be devastating, if you have critical illness cover in place, you’ll know that the financial challenges, at least, are taken care of.
A critical illness will likely prevent you from working, cutting your household income. You’ll want to focus all your energy on getting better but you might need to spend money too. House alterations might be needed if you have mobility issues, say, or you might need to self-fund rehabilitation or care.
While income protection and critical illness might seem interchangeable, they cover different issues in subtly different ways. Putting both in place could be your best option.
Income protection provides monthly payments to replace a salary, while critical illness cover usually provides a lump sum. This could be perfect for covering unplanned expenses.
You’ll need to be aware of the types of conditions covered. These usually include:
- Heart attack
- Stroke
- Some cancers
- Alzheimer’s disease.
We can help you to decide on the right cover for you, and ensure you make full disclosures during your application, reducing the risk of a non-payout later on. It’s worth noting here that according to Forbes, 96.9% of life insurance claims were paid out in 2022. AIG and Aviva recorded 99% and 99.3% payouts respectively for 2023.
3. Life cover can protect your family should the worst happen
If accident and illness are difficult to think about, dwelling on your own mortality is arguably harder still. But this only makes it more important.
Life cover doesn’t have to be expensive but it could keep a roof over the heads of your loved ones. If you have financial dependents who rely on you to help pay household bills, including a mortgage, you’ll want to know that these payments will continue after your death.
You’ll need to think about whether you want to cover an outstanding mortgage amount or provide for those you leave behind. The cost, as well as the amount of cover, and the policy term, can all vary greatly so be sure to contact us before you decide.
Broadly speaking you might want to consider:
- Term assurance policies that only pay out on death within a certain time frame, which generally makes them cheaper
- Decreasing term assurance, where the amount paid out becomes less over time, often in line with the decreasing amount owed on your mortgage, say
- Whole-of-life cover that pays out whenever you die, which can make it much more expensive, so shopping around is key.
At Murphy Wealth, we can help so be sure to get in touch if you’d like to discuss how to protect your family.
Get in touch
Please email us at beyourself@murphywealth.co.uk or give us a call on 0141 221 5353 to see how we can help protect your family and provide you with peace of mind.
Please note
The information contained in this blog was correct at the time of writing and may be outdated at the time of reading.
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. Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from a product provider and will be explained within the policy documentation.
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