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Safeguarding your future: Essential insurance & protection strategies for family security

Protecting family income has become increasingly prevalent, driven by changes in both societal norms and economic conditions. Here we take a look at why this aspect of financial planning is more crucial than ever and give you some ideas around things you could do yourself, or with the guidance of a financial adviser, to keep your family finances water-tight.

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How the changing world around us is affecting the need to balance financial risks

In today’s volatile economic climate, managing financial risks is crucial for families striving to maintain stability and security. From unforeseen health issues to economic downturns, the potential financial pitfalls are many, but so are the strategies to mitigate them. As financial environments continue to change and personal circumstances evolve, the importance of protecting family income grows. Ensuring that there are measures in place to protect against income disruption is not just about safeguarding finances, it’s about providing peace of mind and securing a family’s future against the unforeseen. So, what are some of the challenges we are up against at the moment?

1. Economic volatility and uncertainty: In recent years, economic environments around the globe have faced significant volatility. From the financial crisis of 2008 to the economic impacts of the COVID-19 pandemic, underscoring an unpredictability around economies and job markets. This means we all need financial safeguards in place to maintain stability during economic downturns or sudden job losses.

2. Increase in dual-income households: As more households rely on dual incomes to meet their living standards, the need to protect this combined income becomes more critical. Losing one income due to illness, disability, or death can drastically affect the household’s financial situation, making it difficult to maintain the same quality of life, manage expenses, or save for the future.

3. Rising Cost of Living: With the cost of living continually increasing, especially in areas like housing, education, and healthcare, families are more vulnerable to financial disruptions. Insurance and other protective measures ensure sudden income losses do not force families into debt or financial insecurity.

4. Greater awareness: There’s a growing awareness of the importance of financial planning, thanks in part to more accessible information via the internet and social media. People are more knowledgeable about the options available to protect their income, such as life insurance and emergency savings.

5. Shifts in social safety nets: In this country there is an increasing uncertainty about the robustness of social safety nets and individuals feel a greater need to arrange their own financial protection to ensure they can handle unexpected events.

6. Changing family structures: Modern family structures are evolving. With an increase in single-parent households and families where grandparents are the primary caregivers, the need to secure income is paramount to support dependents who rely heavily on one or two primary earners.

7. Advances in financial products: The financial services industry has also become more adept at addressing consumer needs with a broader range of products tailored to protecting family incomes. These products are more flexible, accessible, and can be customised to fit different family dynamics and financial situations.

The facts and figures around life insurance

Following the outbreak of Covid-19 the way we manage our money and the financial risks surrounding our families has dramatically changed. For many of us it was a wake up call around financial security and what happens to our loved ones after death has become a real worry. A good starting point for the foundations of someone’s financial planning toolkit is life insurance. It really is a cornerstone of financial planning, offering reassurance that your loved ones will be taken care of in the event of your untimely passing. Even though life insurance is one of the cheapest protection products available, many people believe it is not worth the monthly premium because they think that “it won’t happen to me” and that it will simply not be needed. In fact, less than one third of the UK population has life insurance (Which2022). This type of policy protects your life and pays a lump sum to your loved one in the event of your death.   Really it acts as a financial safety net, ensuring your family can maintain their lifestyle, manage debts, and meet future needs without financial hardship.

When is the right time to take out life insurance?

Generally, life insurance should be considered if others depend on your income or if you have significant debts that could be transferred to your partner or family members upon your death. Key life events such as getting married, having children, buying a house, or starting a business are typical triggers for purchasing life insurance. Additionally, the younger and healthier you are when you purchase a policy, the more affordable the premiums will be. It’s crucial not only to think about the present but also to plan for the future uncertainties. By securing a life insurance policy, you provide not just financial security but also peace of mind for yourself and your loved ones.

There are two main types of life insurance

  • Term Life Insurance: Offers coverage for a specified period and is generally less expensive. It’s suitable for families looking for affordable coverage.
  • Whole Life Insurance: Covers you for life and includes an investment component that can grow tax-deferred. This is more expensive but can serve as both a financial safety net and an investment tool.

The hard questions you need to ask yourself around family financial planning

Corona sweeping through the world at the rate it did, sadly demonstrated that no one is immune to chronic illness.  This lead to a shift in attitude where people started to financially prepare more for the future to mitigate family risks.  If you or your partner becomes unable to work or even passes away, with no financial protection or planning in place, this may leave you or your family in serious but avoidable financial difficulties.  The sad fact is that at this moment in time many people globally will have family members that may die without financial protection in place leaving their loved ones financially vulnerable.

Comprehensive insurance coverage for families

Insurance is an essential tool for managing financial risk, providing a safety net against potential losses due to unforeseen events. Here’s a breakdown of the key types of insurance families should consider to ensure comprehensive protection:

Critical illness insurance: provides a lump sum payment if you are diagnosed with one of the specific illnesses listed on your policy, such as cancer, heart attack, or stroke. Designed to ease the financial burden associated with severe health conditions if you require extended time away from work, significant medical treatments, and/or potential modifications to your lifestyle or home to accommodate new health needs. The pay-out can be used for anything whether that be medical expenses, mortgage payments, or even as income replacement, offering flexibility during a challenging time. If you don’t have this in place you will be wholly reliant on support from other family members and/or your own savings. This will reduce your ability to save for retirement and put a grenade amongst your short, medium and long-term goals. All while you are trying to cope with a serious illness that you or your partner may have.

Mortgage protection insurance: Specifically designed to cover your mortgage payments in the event of your death, disability, or sometimes even unemployment. This type of policy ensures your family will not lose their home if you’re unable to make mortgage payments due to these severe circumstances. Typically, the pay-out goes directly to the mortgage lender, not to your family, and the coverage amount decreases as the mortgage balance is paid down. This insurance can be particularly crucial for families where the loss of the primary earner’s income would mean the inability to meet mortgage obligations. It is especially important if the value of the property is perhaps lower than what you purchased it for and it secures the roof over you head if the worse were to happen.

Income protection insurance: provides a regular income if you are unable to work due to illness or injury. Unlike Critical Illness Insurance, which covers specific diseases and provides a lump sum, Income Protection offers a portion of your income (usually between 50% and 70%) until you can start working again, retire, or the policy term ends. This can be invaluable for maintaining your family’s standard of living and covering ongoing expenses during periods of extended absence from work due to health issues. It’s particularly valuable in careers where physical health is crucial and for single-income households.

Health Insurance: Critical for covering medical expenses, which can be exorbitant in the case of serious illness or injury. Good coverage will help you manage the costs of hospital stays, surgeries, prescription medications, and routine check-ups which are essential for preventing more serious health issues.

Home Insurance: If you are a home owner this is insurance you will already have in place. For those who are yet to purchase their first property, this covers damage to your property from a variety of events such as fire, theft, and some natural disasters. It typically includes property insurance, contents insurance and liability protection.

Integrating risk management into your financial plan

Incorporating Critical Illness, Mortgage Protection, Life and Income Protection insurances into your financial plan can provide well-rounded security. These insurances address specific financial vulnerabilities that could arise from health-related absences from work or severe illnesses, thereby ensuring that you and your family are well-protected against a spectrum of potential financial crises. Each type of insurance serves to mitigate specific risks Critical Illness Insurance tackles lump-sum needs associated with severe illnesses, Mortgage Protection secures your home, arguably your most significant asset, Income Protection safeguards your everyday financial flow, Health Insurance ensures you can afford the best care and Life Insurance means your family have the cash to survive if you are no longer here.

While no one likes to think about the potential for serious illness or injury, preparing for these possibilities is a crucial aspect of comprehensive financial planning. You might not need all of these, which is why sometimes it pays to seek financial advice but your first priority should be ensuring your family’s financial needs are covered, allowing you peace of mind to focus on recovery and health without the additional stress of financial strain. Consulting with a financial adviser can help determine the right levels of coverage based on your specific needs and circumstances, tailoring your insurance portfolio to provide the best possible protection for your family.

Create your own strategic financial plan

Effective financial planning involves setting short-term and long-term financial goals and mapping out a strategy to achieve them. This includes budgeting, saving for retirement, planning for children’s education, and managing debt. Consultation with a financial advisor can provide personalised advice based on your family’s financial situation and goals. All of Unividual’s family’s are unique, whether you are financial planning as two mums’, two dads’, a single parent, a divorced couple, grandparents raising children, what your family needs will be unique to you. On top of that the financial landscape is constantly changing, as are a family’s personal circumstances. Regularly reviewing and adjusting your financial plan ensures that it remains relevant and effective. This might involve rebalancing investment portfolios, reassessing insurance needs, or adjusting savings goals.


Protect what matters most, don't leave your family's safety to chance

Knowledge really is power when it comes to financial management. Educating yourself and even your family members on basic financial principles such as budgeting, investing, and the importance of credit scores, can empower everyone to make informed financial decisions and avoid common pitfalls. Don’t wait for uncertainty to find you, instead be proactive about your family’s financial well-being. Protect what matters most with the right insurance coverage. Whether it’s safeguarding your family’s future with life insurance, securing your home with mortgage protection, or maintaining your standard of living with income protection, the right policies can make all the difference in times of need.


Author: Cherie-Anne Baxter

Date: 14th May 2024

Updated: 14th May 2024

Approver: Quilter Financial Limited TBC

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