Protection Policies

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What Do you Mean by Protection?

Protection can mean different things to different people. It is about providing security and peace of mind in knowing that whatever turns life takes everything that means anything to you can be protected.

The law dictates certain types of protection, for example car insurance, so whether we like it or not our cars are protected. It makes sense to want to protect everything you have worked to achieve or of importance to you. There is satisfaction in knowing that if something was to happen to you the people closest to you will be looked after.

For instance, if you suddenly could not work due to illness, if your income was protected this wouldn’t be an issue. If something happens to your house, with protection there it can easily be managed and put right. Protection is there to have financial security where it matters to you most.

Life Insurance

Life cover is a type of protection policy which will only pay out if you die. It is the most commonly known and well understood of all the protection policies as it is fairly straightforward.

Life Insurance is not the same for everyone though or it may not even be the right policy for you. People have different reasons to take it out, for instance a policy for a twenty-year-old will be very different to a policy for a fifty-year-old. It all depends upon circumstance.

Life Insurance offers the knowledge of knowing that even after you are gone, you will still be providing to those closest to you. The amount of cover that you receive can be tailored to your budget. This means that even if you only have a little to put towards protection, it will still be protection nonetheless and there are options out there for you.

Relevant Life Cover

Relevant life cover is used by businesses. It is essentially a death in service benefit. Any public sector worker, for example, is quite likely to have something called a death in service benefit. It’s available through private companies as well, which quite simply means if you die whilst employed at that company, then your company will pay out.

It’s normally anything between three or four times your base annual income to your beneficiary. This would normally be your wife, your partner, your spouse, whatever you choose.

Relevant life protection can also be deducted from your business’s expenses too. This makes it a very tax efficient form of protection. Relevant life cover can get confusing and it is important to seek the advice of a professional to ensure it is the right option for you.

Critical Illness Cover

It is not nice to think about, but you will encounter at least one critical illness in your lifetime. Whether it affects you or a family member or a friend, it is not a nice situation to be put in. There are protection schemes on the market to offer protection in case a critical illness affects your life.

Critical Life Insurance will mean you can have access to a large sum of money which you can use to pay your mortgage off or to help keep you and family members secure if you are not working. It is becoming the most common form of protection as everyone can understand the relevancy of it.

Income Protection

Income protection insurance is quite literally protecting your income. Your family relies on you to generate income and if something happens that means you can’t get to work then what would you do? That is where income protection can be useful.

If you are not working for whatever reason, this policy is in place to pay in monthly stages, so your income won’t be affected. This policy comes with a deferred period that you can choose so you can choose to defer any benefit from the income protection plan for the first six months. This is because employers can decide to grant you sick pay too.

It is different from other policies as it is not paid out in a lump sum. If you are never able to return back to work, there is no need to panic. Income protection policies usually last until retirement, at which point retirement will be around the corner. Income protection is a good way of making sure you can achieve financial stability for life’s bumps.

Family Income Benefit

Family Income Benefit is like life cover, yet you will choose for example your partner, spouse, wife etc. and it will be a regular monthly pay out not a lump sum. It is a good option for those who would prefer regular payments than just a lump sum.

It will allow for your family to still have access to some sort of income even after you can no longer provide for them.

Inheritance Tax

If someone dies and leaves you their properties, you cannot access them until you have paid something called inheritance Tax. The estates left to you will not be released until this tax is paid.

There are ways to avoid inheritance tax such as life insurance policies and writing up a will. By you taking out a ‘whole of life’ insurance policy on yourself means that when you die, the insurance policy will pay out to the beneficiaries and they will then have that money to be able to pay the inheritance tax bill and release the estate.
What is really, really important here, though, is that policy must be written in trust. Anything written in trust remains outside of your estate for inheritance tax planning.

What Protection Should I Use?

Every person is different and will prioritise different things depending on their situation. Protection policies are there to act as a safety net to those you care about for when things go wrong or you can’t provide.

Policies are changing all the time. Policies are improving all the time, especially around critical illnesses. There are policies out there now that cover far more than policies did a few years ago.

The complexity and availability in protection policies means that it can be difficult to find the right policy for you. It is important to make sure you are getting the most out of your money and check you are getting the best out of your policies too.

Every person is different, and policies are very much tailored to specific wants and needs an individual review is really important for protection. A small amount of help from an expert financial adviser can point you in the right direction to achieving full peace of mind. Get in touch today to start protecting the ones closest to you or to explore your current policies.