Having suitable protection can help to reduce your financial risk. It can help you protect what you have now and is especially important if you have children or other dependants.
Maslow’s hierarchy of needs is a theory in psychology that describes how your motivations change as you fulfil your various needs. Securing the basics such as food, water, and shelter sit at the bottom. Once you have these essentials, you can pursue higher pyramid tiers like social connection and independence.
As financial planners, we use a similar pyramid to prioritise elements of your financial life (1):
Protection is the first level of the financial planning pyramid
The base layer of the pyramid is protection. Protection seeks to shield you and your family should life throw an unwelcome curve ball – think of it as your financial “foundation”. With it, other elements of your financial life could remain on track if the worst happens.
The type and level of protection appropriate for you will depend on your circumstances; there’s no cookie-cutter solution – more on this in the next section.
Once you have protection in place, you can turn your attention to growing your wealth.
If you skip protection and prioritise higher tiers of the pyramid, you risk depleting your savings and investments should a shock happen, potentially taking you back to square one.
Read on to discover more about the importance of protection and how it can boost your financial security and that of your family.
Ask yourself: “How ready would I be if life took an unexpected turn?”
Would you be prepared to cope financially if you suddenly lost your job or fell seriously ill?
It can be challenging to think about life’s big “what ifs”, but preparing for the worst could help you and your family manage better should an unwelcome event strike.
There’s no better time than now to ready yourself for the unexpected.
To understand what protection you need, think about your current situation
First, it’s helpful to understand your current situation.
Ask yourself these questions:
- What would happen if you had an accident or illness, or lost your job?
- Could you and your family maintain a roof over your heads if the worst happened?
- What do you want to happen to your wealth when you die, and are your wishes known?
With these questions answered you can begin to identify where protection might help.
A financial planner can help with this. Using our expertise and experience, we can detect problems you may miss and recommend suitable solutions.
Income protection could support you and your family if you can’t work for a period
If you’re unable to work for several weeks or months, you may lose thousands in income. This could create short-term financial problems and throw off your long-term savings and investment plans.
Should this happen, income protection can provide regular payments to replace part of your lost income. This could stop you from having to dip into savings to cover essentials.
Critical illness cover could provide a welcome financial cushion
Additionally, if you fall seriously ill, critical illness cover can pay out a lump sum, removing financial stress during a difficult period so you can take time off work to fully recover, pay for private treatment, or even enjoy a relaxing holiday when you’re better.
Critical illness cover takes many forms and the conditions you’re insured against can vary widely from policy to policy. We can help you determine the cover that is most suitable for you and your circumstances.
We can also identify the level of protection you may need based on factors like your income, mortgage size, and other regular financial commitments that you and your family rely on to maintain your lifestyle.
Life insurance can help ease the financial burden if you or your spouse pass away
Your family will have many dreams that you want to realise together. However, if you passed away prematurely, would your family be able to continue to cover regular outgoings? Would they be able to maintain the mortgage or pay your children’s school fees?
Life insurance could help keep your plans on track. In the event of your death, this normally pays out as a lump sum. Alternatively, you could arrange family income benefit that pays a set amount of income each month to help your family meet their living costs.
Such financial protection can provide security during an emotionally difficult time. If you’re the primary earner in your household, it could cover essential living costs. Alternatively, it could help your family pay off any outstanding debts, provide money to pay for things like school fees, or a deposit for your child’s first home.
As well as helping you choose protection, we can prepare your pension expression of wish and ensure your will is up to date.
At Titan Wealth Planning, we provide a to help you take control over what happens to your estate. Preparing a will makes life easier for your family and friends, and you could even reduce the amount of Inheritance Tax payable on the assets you leave behind.
We can help you prepare further by forecasting what a particular shock may look like
At Titan Wealth Planning, we’re believers in the power of personal advice, and are open-minded about how we can use technology to deliver better outcomes.
One valuable tool is cashflow modelling. Our planners can use this software to simulate how a shock may affect your finances. We’ll be able to take into account any protection you may already have, and if the forecast reveals chinks in your financial armour, take steps to bolster them.
With additional protection in place, we can then re-forecast, giving you peace of mind that you’ve taken the appropriate steps to ensure your financial security, protecting your family’s lifestyle.
With firm financial foundations, you’re well-positioned to focus on creating a bespoke financial plan. We can help you do this, considering your circumstances, lifestyle, and long-term financial goals. We’ll then review your plan at least once a year to ensure it evolves with your and your family’s lives.
Get in touch
Choosing the right protection can be daunting, but we can make it simpler. If you’d like to strengthen your family’s financial foundation, contact us to learn how we can help.
Email info@aspirafp.co.uk or call us on 0800 048 0150.
Risk warnings
The information contained in this article is based on the opinion of Titan Wealth Planning and does not constitute financial advice or a recommendation for any investment or retirement strategy.
Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.
Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.
The Financial Conduct Authority does not regulate cashflow planning or will writing.
