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Insurance: Personal, Family & Business

On the whole, the British public simply don’t like insurance, evidenced by the enormous protection gap in the UK!

The idea that we should pay money out to a third party in the hope that we never see any return is often enough to avoid this uncomfortable issue completely. This means we now have a serious problem in the UK with the vast majority of us significantly underinsured.

Generating the multiple, and often large, cash sums required to realise our financial plans will almost always rely on continued and rising earned income during our working life.

Plan for the worst, hope for the best

Illness or injury can seriously damage financial plans by forcing an individual to erode hard earned savings, or can limit the future ability to earn at the same rate as before. A few thousand pounds diligently saved over a number of years towards a house deposit or school fees can be spent in a matter of months if minor injury or illness prevents earnings.

If a serious or critical illness strikes, then even on returning to work, an individual’s lifetime earning ability may be damaged due to a disability of some kind or perhaps as a result of a lengthy and damaging forced career break. Pension plan forecasts, to generate a given income in retirement, will suffer if an individual can no longer afford to make sufficient regular investments.

Cost Effective Solutions

A cost effective way to manage and protect against this downside risk is to pool it with others via an insurance company. If a large number of people pay a small premium to an insurance company, then if one of those people falls ill, then there is a lump sum or income available to give to that person.

Saving £50 per month into a bank account for 12 months would generate £600 plus interest. Buying an insurance policy for £50 per month might purchase £200,000 of cover payable on serious illness.

Death of an income generating member of the household can leave children and their carer without any means to continue mortgage repayments or cover utility and food bills.

There are various State benefits that may help, but most are limited, don’t start immediately and usually only last for a fixed period of time. Until an individual has enough cash and investments on hand to clear any debt and provide for them self and their family, come what may, then a protection plan or insurance policy should be considered.

There are lots of different types of insurance available and it can be confusing, but broadly speaking, there are four main areas of personal protection:

  • Life Cover
  • Critical Illness Cover
  • Income Protection
  • Accident Sickness & Unemployment Cover (ASU)

What to have and when?

Every type of protection product may become a priority need at some point in our lives.  However, the need to protect our lifestyles and those of their families tend to be a long term, even a permanent need.

Death, sickness or injury can strike any of us at any time.  It has been said that protection should underpin every aspect of financial planning.

The range of protection plans available is very wide.  All protection plans have one thing in common however, and that is to produce a sum of money at exactly the time someone needs it most.

A person’s protection needs are influenced by four key factors:

  • Age
  • Dependants
  • Income
  • Financial liabilities

These factors should be considered in conjunction with each other and not on an individual basis.

Up to 18

A child will usually be dependent on others and have nobody dependent on them. Provision for their financial needs is the responsibility of others.

18 – 25

Young adults start to take on financial responsibility, but initially for themselves, for example, setting up their first home.

25 – 45

This is the age range when most people face their largest protection needs due to:

• Finding a partner
• Having a family
• Moving house (on average once every five to six years)

 

The younger family may well have high protection needs but will need cover at the lowest possible cost.

The death or disability of one of the partners would create a serious financial strain on the family.

45 – 60

Children become independent and the financial effects of parents dying cease to be a priority need. Parents start to focus on protecting themselves, particularly against ill health.
Priority starts to switch from protection to investments and pensions.

After retirement

Protection needs centre more on the provision of long term care and health care as their priority becomes one of maximising their income.

Insurance Broker

We have extensive insurance brokerage capabilities and as such offer advice and guidance for our clients on which insurances they may require and help set up appropriate plans to cover any shortfalls in their existing arrangements. Please feel free to browse through the detailed pages in this Insurance section and contact us should you require advice in this area.