Five ways to protect your family
It is common amongst our society to want to improve our family’s situation and standard of living through the accumulation of wealth.
We are all working to constantly better our situation and work towards the most comfortable financial future possible.
However, we tend to pay less attention when it comes to protecting that wealth, and the income the helps generate it.
In the world of insurance there are two main categories that are familiar to us all:
Mandatory insurances are those that we all have to have by law within the UK, the most common example being Car Insurance.
The Choice insurances are those we have taken out in order to provide a safety net; examples being TV/ Appliance Insurance, Phone Insurance and Pet Insurance.
In our experience, individuals have insured everything they can within their lives. However, they have left out the most important asset; themselves! You are the foundation as you pay for all of these things and if something happens to you, or your income, all of these will be affected.
Why isn’t insuring oneself under the mandatory category?
The misconceptions of ‘it isn’t going to happen to me’ and ‘I never intend to put in a claim’ are a thing of the past and as we have all witnessed, and lived through, over the last year, none of us are in control of what may happen to us and none of us have a crystal ball.
We hope a claim never occurs, none of us want to think about getting ill or dying, but failing to protect against such events can have disastrous financial implications.
Think about the earners within your household and how you would manage to pay the mortgage, do the weekly grocery shop, maintain the car payments if that person and income was taken away.
At MHA Tait Walker Wealth Management, we believe that Protection is the foundation of the Financial Planning process.
Each circumstance is different and everyone has different needs. However, we believe there are five fundamental ways, as a minimum, in which we can protect ourselves, our lifestyle and our family.
1. Emergency Fund/ Rainy Day Money
It is important to ensure that there is an emergency fund to meet the cost of any unexpected outlays and we recommend that you put money aside, on a regular basis, in order to achieve this.
The general recommendation is that an amount equal to three months outgoings would be appropriate to maintain for emergency requirements.
2. Life Insurance/ Life Cover
This type of cover is designed to protect your loved ones financially if you were to die. Typically, a lump sum is paid out if you die. The most common reasons to have life insurance is to protect outstanding mortgages and debts so that the ones you leave behind can keep their home. It is also designed to provide a ‘cushion’ to aid your loved ones and help them deal with the finances if the worst were to occur.
3. Income Protection
This type of policy typically pays up to 70% of your salary each month if you are unable to work due to ill health. You can choose when you require payment to match with certain employer benefits and for how long you wish to have the cover paid out for.
You can also get this benefit if you are self-employed.
4. Critical Illness
This cover is designed to pay a lump sum on diagnosis on a range of different critical illnesses such as heart attacks, strokes and cancers. Again, the most common reason is to pay off mortgage/ debts but also act as a buffer alongside Income Protection to pay for the additional items that may become unaffordable.
With these insurances, there are a multitude to options and conditions. Each individual / household requirements are discussed and a bespoke protection plan designed. The worst scenario would be thinking you have the correct cover when, in fact, you do not. The result could be as devastating as having no cover at all.
5. Will and Lasting Powers of Attorney
This effectively ties everything up as your Will ensures that your assets are distributed according to your wishes. It outlines who you give power to, to follow your instructions. If you have young children, it states who you wish to act as the legal guardians and look after your children. It can specify your funeral wishes and so on. One of the main benefits is that it takes away the stress and heartache for your loved ones, who will no doubt be suffering due to your death and gives them instructions that you have left.
Lasting Powers of Attorneys give legal permission over your affairs to someone you trust if you no longer have capacity and the have lost the ability to make decisions.
We have highlighted a few key issues here and tried to give you something to think about.
If you would like to discuss any of the topics mentioned in this blog, whether it be reviewing what you currently have, or setting up a new arrangement based upon your own protection situation, please contact Omar Din at firstname.lastname@example.org.