Protection and sudden, unexpected changes

17th May

There is no denying that since spring 2020 we have been made very aware of how dramatically things can suddenly change. Recent events serve as a reminder that however much we try to make plans, there could be something just around the corner that scuppers them. Stephen Palmer of Cranwell Wealth Solutions explains the importance of protection in times of sudden change.

For many, recent changes have been a reminder of how precarious our finances are and how heavily they can be affected when things change. The economic effects of the pandemic and the war in Ukraine have contributed to a spike in fuel, food and other prices that has sent UK inflation soaring.

Prices are predicted to continue climbing, meaning that for many households any rainy-day savings they have are likely to be shrinking or even vanishing entirely.

Safety net

It is generally recommended that three to six months’ expenditure is set aside as emergency savings. While it can take years to build up these funds, it can take just a matter of weeks to deplete them.

Regardless of whether or not they’ve been able to build up rainy-day funds, many households are very dependent on the income they receive and need it to keep coming in. It only takes one unfortunate turn of events, such as an illness or accident that prevents you from working, to put this in peril. This is why protection insurance policies, such as income protection and critical illness insurance, are so invaluable.

Income protection helps cover outgoings such as mortgage repayments, rent, bills and other household essentials in the event of you being unable to work because of illness or an accident. It typically pays out between 50% and 65% of your income after a pre-agreed deferral period (usually three to six months) has passed, and most policies pay out for as long as needed. Critical illness insurance is designed to pay out a lump sum on the diagnosis of certain specified critical illnesses or medical conditions.

We are much more likely to take out insurance on material goods such mobile phones than taking out protection on the income that pays for those products, even though the impact of losing an income is much bigger. While the prospect isn’t nice to think about, having to worry about financial matters in the event of something bad happening is even worse. Question whether you can afford to live without protection insurance in the event of not being able to work, especially if you are self-employed. Then review your outgoings and what you are prioritising above protection insurance.

Future proofing

Protection insurance provides peace of mind, however there are many different types of protection insurance available, covering various potential difficulties and with a range of policy types and costs. This can be overwhelming, so it can be helpful to ask an expert to talk through the different options and help decide what would be best for you and your specific circumstances.

At Cranwell Wealth Solutions we have a wealth of expertise in protection insurance. Get in touch with us today to arrange a non-obligation appointment to discuss the best protection options for you. Simply call one of our advisers or pop into our Heathfield branch.

01435 866 101