Having a financial plan is the key to securing your financial future and reaching those all important goals and objectives.

But what would happen to that plan and your family if you became seriously ill, were made redundant or, in the worst case, if you died? That sudden loss of income could bring that plan to a halt.

Protecting yourself against the financial costs of illness, injury, unemployment and death is a major cornerstone of securing your financial future. If you don’t have any cover in place currently, an insurance policy could be just what you need to safeguard you and your loved ones.

An overview

There are many different insurance products on the market and determining which is right for you can be a complex process.

A number of factors should be considered, including your job, health, family arrangements and current and likely future financial situation.

Before looking at specific policies, it can be helpful to ask yourself the following questions:

• What do you need to protect?
• How long do you need protection?
• What cover do you already have in place?

If you do have existing cover in place, when was the last time you reviewed it? If your situation has changed, for example if you’ve moved house and taken on a bigger mortgage, if your family’s grown or if your income has changed, it’s probably worthwhile taking another look at the protection policies you have and whether they’re still right for you. But remember, don’t cancel any existing plans until you’ve taken advice and have new cover in place.

Types of protection

Life insurance
A life insurance policy will pay out a lump sum in the event of your death. Life insurance can be used to provide money for loved ones or pay off existing debts, depending on your policy. Term insurance and whole-of-life policies are the two most common types of life cover.

Term insurance policies pay out if you die during a set period of time, while whole-of-life policies do just that: cover you for the whole of your life.

Critical illness cover
Critical illness protection provides you with a lump sum pay out should you suffer from a serious illness or condition such as cancer.

The types of illnesses covered vary depending on the insurer and there may be other caveats about the acuteness of your illness.

Income protection
Income protection policies pay out if you’re unable to work due to illness or injury. Tax-free pay outs are made monthly and are generally based on a percentage of your earnings – usually between 50% and 70%.

Mortgage payment protection
Mortgage payment protection insurance (MPPI) policies will cover your mortgage repayments if you are unable to earn an income due to injury, illness or unemployment. MPPI pays out a fixed sum each month for between one and two years after you make a claim.

Things to consider

Have the right amount of cover
It’s surprisingly easy to under or overestimate the amount of protection cover you need. For life insurance and critical illness protection, consider what kind of lump sum you’d need to cover any outstanding mortgage and other debts. When protecting against the effects on your family, you might also want to think about providing for the future costs of bringing up children for example.

With income protection, remember that your expenditure is likely to be lower if you’re unable to work and it may not be necessary to insure your total income. Drawing up a prospective out-of-work budget will help you work out how much income you’d need.

Know the premium
Premiums are a major factor in how you choose your policy. Remember not to take prices at face value and be aware that not all premiums are fixed. Reviewable premiums which are likely to rise over the term are a good example of this.

Ensure you’re covered
It is essential that you read the small print to ensure that the policy will cover your needs. Buying unnecessary insurance is not only a waste of money but will give you a nasty surprise should you need to make a claim.

Get advice
It’s essential that you seek professional advice before purchasing protection insurance. Our friendly team of experts can help you choose a policy fit to protect your family’s future and we’ll make sure you have just the right amount of protection.