As we welcome another year, it’s important to start thinking about financial planning for 2022. Whilst most people jump straight to pensions or savings when thinking about financial planning, protection insurance should also be a key part of your wider financial plan. Here are five frequently asked questions to help you get the answers you need; around why financial protection insurance should be included in your monthly budget in order to maintain financial stability in an unexpected turn of events.
1. Why is financial protection insurance important?
As we all know from looking back at the last couple of years, life rarely goes to plan! However, having the right financial protection in place allows us to plan for the unexpected, helping us to safeguard ourselves, our loved ones, and our assets from some of the uncertainties that life can throw at us. For example, protection acts as a safety net if your situation changes and leaves you financially vulnerable; having insurance in place can provide your loved ones with the short-term cash injection - or longer-term solution - that your family needs.
Financial protection can also provide you with peace of mind, knowing that you and your family will be financially secure if essential income stopped suddenly due to unplanned events such as accident or illness. It’s reassuring to know that there are policies available to support you if things don’t go to plan. And, if they don’t, your family has the time, money, and space to focus on what’s important and not worry about essential living costs such as bills, rent or mortgage payments in tough times.
We know these incidences can occur at any stage in life, which is why Owl Financial is #WithYouThroughLife.
2. Do I really need life insurance and, if so, what age should I think about taking out a policy?
Life insurance is there to support your family or those close to you, financially in the unfortunate event of your death. This is in the form of a lump sum, or regular payments, depending on the specific policy. Most of us benefit from having life insurance in place, but the extent to which this is necessary depends on your personal circumstances – if you have dependents, the answer is yes, you should have life insurance. The money that your loved ones will receive can help pay for things like childcare, income replacement or paying off debts, such as a mortgage. However, even if you are single and have no dependents, life insurance can help to support close friends and family in the form of inheritance or to pay off any debts you may have.
Whilst when you’re young, life insurance may not be at the forefront of your mind. However, it’s important to remember that buying life insurance isn’t reliant on your age, but more importantly where you’re at in life, and whether you have any dependents. Life insurance will help to support those who are reliant on you, whether you’re in your 20s, or your 70s! Unfortunate events can and do happen, no matter how young or old you may be.
3. What about income protection – do I really need this if I get sick pay?
Income protection insurance will provide you with a regular income if you’re unable to work due to sickness or accident, whether you’re employed or self-employed. Some people believe that if they receive sick pay from their employer, they won’t benefit from income protection. This isn’t the case. Statutory Sick Pay (SSP) was introduced by the government to mitigate the damage caused by not getting paid due to illness-related work absence. This is paid by your employer for up to 28 weeks. However, whilst this may seem like enough, SSP is only £96.35 per week; less than £400 per month. For a family with rent or a mortgage and bills to pay, this really isn’t much. Some employers may offer company sick pay schemes in place of SSP; however, these vary from employer to employer and usually only last a set number of weeks, whereafter your pay may be halved or cut totally. If you’re self-employed, you unfortunately won’t benefit from either scheme and may be left with no income support.
That’s where income protection comes in. It’s a personal insurance policy that is independent of your employer and SSP – you can tailor your cover to whatever suits your personal circumstances. This means that you’ll have money in the bank to keep up with any essential monthly expenditures that you and your family have until you are fit enough to return to work, or until you retire. So, the answer is yes, income protection is vital to have in place on top of receiving sick pay!
4. What does home insurance cover and why is it important?
There are two different types of home insurance – buildings insurance and contents insurance. Buildings insurance covers the cost of repairing any damage to the structure of your property or rebuilding your home if it is destroyed. This often includes damage caused by events such as fires, floods, theft, vandalism and fallen trees. If you are a homeowner, buildings insurance will be a condition of the mortgage, and if you don’t have a mortgage, it is still advisable to have this in place so that you can pay for any structural repairs or a full rebuild. As a tenant, your landlord should usually take care of this for you.
Homeowner or tenant, having contents insurance in place is a very sensible idea. You need to ask yourself what you’d do if your high-value possessions were stolen, or all the contents of your home destroyed in the likes of a fire. Would you be able to afford replacements? Contents insurance will cover the contents of your house in the event of loss, damage, or theft, and will allow you to buy replacements and not leave you out of pocket.
Overall, having the right financial protection in place is extremely valuable and should be at the forefront of your mind when financial planning for 2022. Or, if you already have protection in place, it may be time to review and renew your policies to match your current circumstances. We are here to support you with any questions you may have.
5. Will my claim be hassle-free?
At Owl, we’re with you through life, from taking out a policy, to the point of claim. The insurers we work with are committed to making the claims process straight forward and hassle-free – of course, we’re on hand to help too. Millions of pounds have been paid out to clients of Owl by insurers, so as long as you’ve been truthful about your situation from the get-go, you can be confident that it will pay out.
We’ve helped many clients with their claims – one being husband and father-of-two, Mithun. Working in his local NHS and A&E department as a nurse, Mithun experienced first-hand that accidents can and do happen, and as someone who made his daily commute to work on a motorbike, he understood the importance of having financial protection in place, just in case. Unfortunately, one day Mithun was involved in a horrific accident, leading to a 47 day stay in intensive care. Luckily, having taken out a policy several years earlier, Mithun did not have to worry about the financial impact of his accident on his family and could focus fully on his recovery. Mithun’s Adviser supported him through the whole process – from taking out the policy to the point of claim. He received a pay out of £18,600. Read more about Mithun’s story here: https://www.owlfinancial.co.uk/media/r4ofys22/owl_case-study_mithun.pdf.
At Owl Financial, we have an all-encompassing team of experts designed to help you with your specific financial needs. So, if you need financial protection advice, contact us here.
We receive thousands of comments from clients who are happy about the service provided by their Adviser. For example, you’ll find positive examples on VouchedFor, where the average rating for an Owl Financial Adviser is 5 out of 5.
We’re here to help. We’re with you through life.