Protection
Many of us have a strong desire to secure our future by building wealth during our working lives, in property, pension funds, savings, investments and ISA's and whilst it is always a great idea to save money the question often overlooked is "what happens if I die prematurely or become incapacitated through an illness or injury?"
Its a simple fact that Life Assurance and Income Protection are the foundation blocks of wealth management. Without adequate protection of your earning potential the dreams hopes and goals you have for yourself and your family can amount to nothing.
State support is minimal and increasingly becoming means tested as Government's seek to minimise costs.
Short Term incapacity benefit for someone under State Pension age is only £67.75 per week rising to a maximum of £89.80 per week if you become incapacitated long term!
Source: http://www.dwp.gov.uk/lifeevent/benefits
With the average household spend in the UK being £459 per week (and then some!) Source: www.statistics.gov.uk have you got enough regular income or capital to bridge the gap?
In other words, The State only provides basic subsistence if even that, and the quality of life and that of your family that was based on your earning potential has taken a seismic shock. If you become incapacitated, especially long term through an accident or illness, or even die prematurely the loss of earning potential that provides the quality of life for your family is lost. Its that simple.
Some are lucky enough to enjoy some support from their employers, with death in service and ill health benefits but even this can be limited and often applicable only if you meet certain criteria. It is always important to check with your employer the level and nature of benefits they will provide if you die or become incapacitated. Most HR departments will be able to provide you with information via booklets or on their company websites.
As well as the emotional cost a death or serious incapacity can cause, this loss of earning potential can have serious and dramatic effects on families, often compounding the emotional effect. It can lead to loss of the family home, a downturn in the quality of life the family is used to, breakdowns in family relationships and long reaching emotional and financial effects well past the event that caused it.
The questions you need to ask yourself are:
Does my employer offer protection benefits? would it be enough? how long would it pay for? Would my partner or spouse have to get a job to bring extra income in? Do we have adequate savings in cash to bridge the gap? Would we have to sell things or downsize to balance the books? Would we be able to keep up the mortgage payments? Would we be able to clear credit card or loan balances? If either of us were incapacitated would we need to buy special equipment or adaptations for the home? would my spouse or partner want to give up work to help with convalescence or care needs? would we need to employ a gardener, cleaner or even driver for the children? would we need professional nursing care? could we expect any support from parents or in-laws? how much would we need to spend on continuing childcare?
Providing adequate income after a death, for a surviving partner and children is not expensive, indeed it can often be as little as just a few pounds per week.
Providing income or even say lumps sums to pay off the mortgage or other financial commitments, in the event of say a "critical" illness or incapacity is not that expensive either, especially when compared to the potential financial and emotional cost such an event can have.
As Independent Financial advisers we can access "whole of market" products that can provide the right balance between the types of protection required for specific family needs and at a cost that provides value for money.
One very important part of any Protection strategy is ensuring you have an up to date Will, its one of the cheapest and simplest Protection Plans you can buy! Dying without a Will is called "intestacy" and if this happens the wealth you have worked hard to build may not go to the loved ones that you intend it to. Again this can have financial and emotional costs you did not anticiapte. Intestacy has prescriptive rules and an up to date correctly drawn up Will is the only way to ensure that you pass on what you want to whom you want.
Wealth Management has access to professional legal advice that we can refer you to.
Protection, its the foundation stone upon which all of your wealth and your families future depends.