Life is full of surprises, some good and some bad. When the bad ones happen, they can have a big impact on your finances. Nobody can predict the future, but you can prepare for it.

We all understand the logic of protection. We insure our cars, the contents of our homes, our holidays and our pets almost as a matter of course. Would you feel comfortable travelling without medical insurance, or letting your home or car insurance lapse? But have you got adequate protection for what you value most – your family and your quality of life?

Financial protection provides a safety net that can help you and your family weather life’s unexpected storms.

Financial protection such as insurance cover helps ensure that you and your family will be able to pay bills, maintain your lifestyle and safeguard your savings, should the worst happen.

What financial protection are we talking about?

There are many different types of protection insurance, depending on who, or what you need to protect and for how long.

The three most widely available Financial Protection products that we are referring to here are:

Life Assurance & Life Insurance

Life assurance and life insurance both pay out a tax-free lump sum on your death, so you know that your family will be well provided for if the worst should happen.

Would your family be financially vulnerable if you died unexpectedly tomorrow? Would they have a large inheritance tax bill to pay?

Life assurance, generally covers the whole of your life, whenever death may occur, rather than a fixed term. This can be particularly useful if you’re expecting your estate to have a liability to Inheritance Tax (IHT) and want to make sure your family can cover it. Even if you are planning to reduce your liability to IHT during your lifetime, would there be a liability if you died tomorrow, and how would your family cover it?

It’s important that any such policy is written in a suitable trust, so that the pay-out is outside of your estate and won’t be counted in an IHT assessment, but could be used to cover the IHT bill.

Life Insurance, however, covers you for a fixed term, not the whole of your life. These fixed term protection policies are useful when covering a financial commitment that will reduce or end in the future, such as a mortgage, or school fees.

Are you a business owner?

If you own a business, there could be tax advantages of arranging life insurance through your business, such as a Relevant Life Plan. Some of the key benefits are:

The taxman doesn’t treat premiums paid by employers as a benefit in kind. This means directors or employees don’t have to pay income tax on the premiums.

Nor are the premiums usually assessable for employer or employee National Insurance contributions.

If the taxman is satisfied the premiums qualify under the ‘wholly and exclusively’ rules, the business can treat them as an allowable expense for corporation tax.

There are various rules for a plan to qualify as a relevant life plan and it’s important to make sure all options are considered.

Protection is not only available to provide cover for if you die. Other important aspects of financial protection to consider are:

Critical Illness Cover pays out a lump sum if you suffer a specified illness such as a stroke, cancer or an event such as a heart attack. The cover can be for a specific time period or for your whole life.

Would you or your family be financially vulnerable if you suffered with such an illness or event?

All protection cover is about de-risking your financial situation and that of your family should the unexpected happen.

Critical illness cover can help you and your family financially if you are diagnosed with a serious illness or suffer a serious health event. The proceeds can be used to pay for medical treatment, adapt your home, or cover living expenses if you are unable to work. It can help to ease the financial burden and allow you to focus on your health and recovery.

Income Protection pays a percentage of your income so you can continue to cover your outgoings, if you’re unable to work or lose an income unexpectedly.

Are you reliant on your income to support your family and your lifestyle?

Income protection is more than just a safety net, it protects your family and your way of life.

An Income Protection plan replaces a percentage of your income if you can’t earn, meaning you can continue to pay the bills, make mortgage repayments, and simply stay afloat. These policies should not just be viewed as protecting your standard of living but as insuring an income producing asset: you.

Protecting yourself, your standard of living and your health can be far more valuable than protecting your material possessions. The impact of losing an income can send shock waves through a family.

If you’re the main household earner, or even if you aren’t, but your income contributes to the household, it can have a huge impact. Especially if you’re self-employed and don’t have any of the cover or benefits that might come as standard if you work for an employer.

Often, the question isn’t whether or not to get protection, but whether you can afford to live without it.

Income Protection also means you’re protecting your longer-term savings and investments too. If you’re suddenly unable to earn, you wouldn’t need to raid your savings to pay the bills.

So what are the benefits of financial protection?

There are many benefits to having financial protection, the main one being peace of mind that you are covered should the unexpected happen, you or your family will not lose financial security.

Don’t wait until it’s too late to be protected.

Life is full of uncertainties, but financial protection can help you and your family feel more secure, before it’s too late.

Taking out suitable cover could be the most far-sighted and potentially life-changing pieces of financial planning you’ll ever do.

If you should need it, it’s absolutely invaluable.

We can help you make sure you have the right level and type of protection for you, along with the appropriate Trust in place, both now and in the future.