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Protecting Your Income

Why Income Protection?

Protecting Your Income

The current economic climate means many families are looking for ways to cut costs. Research into the cost of raising a child by LV= shows 45% of parents are spending less on holidays while 27% are cutting back on essential spending such as food.

More worryingly, 47% of parents have no life cover, income protection or critical illness cover and 26% have cancelled or reviewed their insurance cover in an attempt to save money. (Source: LV= January 2013.)

While reviewing your protection to ensure you have the right amount and are getting value for money is a good idea, reducing or cancelling your protection altogether is not. The risk of any of these events hasn’t diminished so it’s essential you have the right type of cover for your specific needs. The following guide is designed to help you understand the solutions available and try to give you a basic idea of how to calculate the amount of cover you might need.

Why Income Protection?

It is true to say that not everyone needs cover. Life insurance, for example, pays out a lump sum on death. For a family with small children, the need for this cover is straightforward. If the family’s main breadwinner is removed, for example, it would not take very long before the financial stability of the family was seriously affected. Remove the main source of income, and a replacement needs to be found.

However, if you are single and have no financial dependants, you might consider it a waste of time leaving a lump sum that is unnecessary and will just cost you money to fund. Nevertheless, if you are single, you should still consider what would happen if you fall ill or have an accident and are unable to work.

The state benefits available are intended to provide a safety net only. They will not help you keep up a lifestyle of holidays and eating out or make any inroads into repaying a mortgage.

Therefore, before you make any decisions, you need to take a look at your own situation – and some of the following questions may help you to start prioritising what is most important to you:

  • Do you have young children or others who are dependent on you financially?
  •  How old are your dependants?
  • Will your dependants be heading to university?
  • Do you pay school fees or nursing-home fees for others?
  • Will any current dependants become financially independent and if so, how soon will that be?
  • Do you have debts (including a mortgage) that your beneficiaries could not manage, even if it were only for a short time?
  • Do you have investments that might provide income if you were unable to work?
  • Do you have any assets that could be sold if you were unable to work?
  • Would you need to move house if you were less mobile?
  • How do you travel about?
  • How far are you from friends, relatives and local amenities?

In order to ensure you have the right type and level of cover to suit your needs get in touch to arrange an immediate review of your current protection planning.