How the right cover can offer you peace of mind that your wealth is protected

Building a strong financial plan means much more than just focusing on wealth accumulation. As well as accruing wealth, it’s important to understand how to protect it.

Saving and investing can feel like the more exciting aspects of your plan, while insurance can often seem like the poor relation, seen as money spent with no discernible benefit.

But if the unexpected happens, having the right protection in place can make a whole world of difference, both for you and your loved ones. Read on to find out why.

The right cover underpins every aspect of your financial strategy, shielding your wealth from unforeseeable circumstances

Life is unpredictable. And when we work together to build your financial plan, part of the process is to take this unpredictability into account.

While we can use cashflow modelling to create your saving, investing, and spending strategy to align with your life goals, we can’t look into a crystal ball to see what life will send your way.

This is where different types of cover come into play, with life insurance, income protection, and critical illness cover acting as a safeguard for your wealth and giving you peace of mind.

Given that it’s such a cornerstone of financial planning, it can be surprising to learn that protection can often be seen in a somewhat casual light.

For example, according to CRIF, Brits are more likely to insure their pets than people in other European countries and the US. But we are the nation least likely to insure our own lives.

Common misconceptions surrounding protection could be putting you off, so it’s important to look beyond these

There are a few reasons people may be dissuaded from taking out protection, including:

Thinking it’s not necessary

It’s very difficult to think about anything unpleasant happening, so many people simply don’t want to. Instead, they optimistically assume or hope nothing will happen to them.

Of course, the ideal outcome is having cover that you never need. But not having protection in place can hit hard if circumstances change and you end up needing it.

Worrying that it’ll be too expensive

While you may worry that the premiums will be too expensive, protection can be considered an investment in your wellbeing and peace of mind. Additionally, taking out a policy earlier in life often means the cost is lower.

Together, we can explore the right kind of protection for you that fits into your overarching financial strategy.

Assuming that insurance policies rarely pay out

There can be a broad misconception that there’s little point in having income protection, or life or critical illness cover, as it won’t pay out.

But according to figures from the ABI, 96.9% of all claims were paid out in 2024.

Life cover, income protection, and critical illness cover all play their part in giving you peace of mind

The types of protection you need will depend on your circumstances, such as whether you’re still paying a mortgage, working, or retired.

Life cover

This pays out a lump sum to your nominated beneficiaries when you die. This can be reassuring for your loved ones, especially if you’re still paying a mortgage or school fees.

The main types of life insurance products are:

• Level term, in which your premium and payout remain the same throughout the duration of the policy.
• Term, where your cover is provided over a fixed period of time.
• Decreasing term, under which the payout decreases over time, usually to cover a mortgage.

In some cases, writing your life insurance into a trust can be beneficial, especially if you’ve taken it out to cover any potential Inheritance Tax (IHT) bill.

Putting it into trust effectively removes the payout from your estate, potentially taking it outside the scope of IHT.

This can be quite complex, so we’d always recommend discussing this before you take any action.

Critical illness cover

This type of cover pays out a lump sum if you’re diagnosed with a specific condition covered by the policy, such as cancer or a heart attack.

It can offer you peace of mind that you can continue to pay your bills in the event you can’t work due to illness.

Income protection

If you can’t work due to illness or injury, income protection cover will pay out a percentage of your salary.

There is sometimes a waiting period before it kicks in, so you can adapt the cover to suit your own circumstances. For example, your employer may have a sick pay policy that covers the early weeks.

This gives you some reassurance that you can still pay your mortgage and essential bills, even if you can’t work for a period of time.

With this type of protection, you can keep contributing to your pensions and savings, to some extent, meaning there is less disruption to saving towards your long-term goals.

Get in touch

It’s important to find the right cover to match your own circumstances, and we can talk about this as part of your overall financial strategy.

If you’d like to talk to us about cover or any other aspect of financial planning, email us at info@andersonfinancialltd.com or call us on 020 8943 0065.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Note that life insurance and financial protection plans typically have no cash in value at any time, and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.