Most people don’t like to think about what would happen if they became too ill to financially support their family. Financial protection is an essential part of creating a secure future for your loved ones, however understanding what cover you need can be confusing.
How would you manage financially if someone in your family was unable to earn money, or became ill or were to die prematurely? It’s not something we like to think about, but if you have left regular employment and are now either retired or have become self-employed, then any previous protection you received from an employer now becomes your responsibility.
Think about the regular items you and your family spend your money on – holidays, socialising, club memberships, family events. Paying for these could become more difficult without the right protection in place. Start by covering your debts and other essential costs, for example, any mortgage payments, council tax, gas, electric and food costs. You can then consider additional protection for other priorities.
The main types of protection
- Healthcare insurance – with NHS waiting lists at an all-time high, the number of people buying private medical insurance (PMI) continues to surge, with almost 7 million UK adults now having a PMI policy.
- Critical illness cover – pays out a lump sum or regular payments on the diagnosis of a specified critical illness. A lump sum could help you to take time off, modify the house, pay for medical treatment, or give you time to recuperate or adjust to your new condition. You can also build in children’s cover – a lump sum pay out if they are diagnosed with a critical illness could allow you to take unpaid leave to care for them.
- Income protection – pays out a regular income to replace income you’ve lost through being unable to work. You can choose to take cover for a set period of time – for example, one to three years or to age 65 – and delay the start of payments for a number of months, both of which can help keep premiums down. You can also choose your level of cover – usually somewhere between half and two-thirds of your income.
- Life insurance – pays out on death and can provide a lump sum or regular monthly payments over a specified timeframe – say until children reach a certain age. The payments can help pay off or cover a mortgage, pay for school fees and cover lost income.
Protecting your inheritance
In the event of your death, depending on the size of your estate, your family or other beneficiaries could become liable for Inheritance Tax. If there are not sufficient funds readily available or adequate plans in place, your family may have to sell assets like the family home to cover the tax bill.
One option is to set up a Trust for your dependants, which has several advantages:
- It pays out quickly on death so there’s no need to wait for probate to access funds.
- It falls outside of your estate which means there’s no Inheritance Tax liability as long as it’s been in place for seven years before you die.
- You decide exactly how much money goes where and when.
Pensions are also an important part of Inheritance Tax planning as they generally fall outside of your estate. However the pension rules can be complex so it’s important that you speak with your Origen adviser. Make sure you have informed the pension scheme of the right beneficiaries and that your nomination forms are kept up to date so your family can benefit as you would wish on your death.
Talk to an Origen adviser
Ready to get more information on protecting you and your family? An Origen adviser will talk you through the various options, assess your needs and help you put in place an affordable plan to protects you and your family’s wealth.
We will ensure you have the most appropriate insurances in place, providing peace of mind that your family will be financially supported. Please contact your Origen adviser today, or our Client Services Team on 0344 209 3925* or by email at clientservices@origenfs.co.uk.
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