Everybody appreciates the importance of accumulating wealth for a comfortable financial future. But people pay less attention when it comes to protecting that wealth – and the income that helps to generate it.
Indeed, some reports suggest that as many as 80% of people with a mortgage have no income protection at all*.
Of course, illnesses and deaths are not things that we like to think about, but failing to protect against such eventualities can have disastrous consequences for our loved ones, from struggling to pay the mortgage to crippling inheritance tax bills.
“Insurance to protect your finances is a vital but it can be complex putting the right combination of policies together” says Liz Alley, director of financial planning at Brewin Dolphin. “It’s wise to get professional advice to make sure the level and type of cover dovetails correctly into your overarching financial protection strategy.”
Here are just some of the policies that need to be considered.
Generally speaking, anybody with dependants or an outstanding mortgage should look at taking out a life policy. At the very least, this should cover debts and ensure the family can keep their home, but preferably it should provide an additional sum to help cushion the shock to your family finances at such a difficult time.
These policies typically pay out between 50%-70% of your salary, tax free, if you are unable to work due to illness or injury.
They are an essential form of cover for those with dependants but the terms and conditions vary; some pay out until retirement or death, or until you return to work. Almost all will only pay out once a pre-agreed period has passed, ranging from three months to a year.
That is why it is important to make sure you understand the small print, and how the policy may complement any savings you have or work benefits you may be entitled to.
One very common cause of contention is that some policies pay out if you cannot return to your own occupation. Others pay out only if you are incapable of doing any job. That is why it is so important to make sure the right policy is put in place.
These policies pay out a lump sum, as opposed to an income, on diagnosis of a range of critical conditions, such as heart attacks, strokes, and certain types of cancer – but each policy will have its own definitive list.
Typically, they are used to pay off the mortgage and any other debts, or they could be used to pay off school fees that are no longer affordable.
There are other policies available that cover other eventualities. For a detailed consultation, contact Brewin Dolphin.
No investment is suitable in all cases and if you have any doubts as to an investment's suitability then you should contact us. We or a connected person may have positions in or options on the securities mentioned herein or may buy, sell or offer to make a purchase or sale of such securities from time to time. In addition we reserve the right to act as principal or agent with regard to the sale or purchase of any security mentioned in this document. For further information, please refer to our conflicts policy which is available on request or can be accessed via our website at www.brewin.co.uk
The information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness. The opinions expressed in this document are not necessarily the views held throughout Brewin Dolphin Ltd.