31/03/2025
Protect your loved ones with tax-efficient planning
Nobody can predict your future, but that doesn’t mean you can’t prepare for it. Protecting your family and your assets brings reassurance that, whatever happens, everything you care about is properly safeguarded.
At a glance
Protecting your family is often low on a busy to-do list, yet it’s a fundamental part of any family’s financial plan – and financial resilience.
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 anything happen.
A financial adviser can help you pick the right level of protection for you, both now and in the future.
We can all see the logic in financial protection. In fact, 2024 saw a record number of people taking out income protection policies according to the Association of British Insurers website.1
We insure our tangible assets – cars, the contents of our homes, even our pets – almost as a matter of course. But protecting yourself, your standard of living and your health can be far more valuable than protecting your material possessions.
What types of protection should I be thinking about?
The rule of thumb is, if you value it – protect it. Different types of protection insurance exist, depending on what, or whom, you need to protect, and for how long. The three most widely available are Life Assurance, Income Protection and Critical Illness Protection.
Income protection pays a percentage of your income so you can continue to cover bills and outgoings, if you’re unable to work through illness.
Critical Illness Cover pays out a lump sum if you suffer a serious illness such as cancer or a heart attack.
Life Assurance pays out a lump sum on death. If the policy is written in trust, the pay-out will be free from IHT. More importantly, for most people, this will help avoid delays during probate.
Protecting your income protects your family
Income protection is more than just a safety net, particularly if you’re one of the UK’s 4.25m self-employed.2 If you’re self-employed, you have responsibility for your health and welfare, as well as your pension.
The impact of losing an income can send shock waves through a family. An Income Protection plan replaces a percentage of your income if you can’t earn, meaning you can continue to pay the bills and stay afloat.
Income Protection also means you’re protecting your longer-term savings and investments too. If you’re unable to earn, due to illness, you wouldn’t need to raid your savings to pay the bills.
Your protection checklist
Would your family be financially secure if you couldn’t work, suffered a serious illness or died?
Do you have a ‘rainy day’ cash fund that you could live on for six months?
Would you be able to afford to keep up payments for the family home if you or your partner lost an income?
Would your older children manage if they were unable to pay their mortgage? Would you be able to step in to help?
Would you have to cut back or dip into savings to keep afloat?
If you answered no any of these questions, then you may not be properly insured. A financial adviser can help you decide on a proper level of protection.
What do Life Assurance and Life Insurance policies cover?
Life Assurance is a whole life policy that pays out a tax-free lump sum on death whenever that occurs. Life Assurance policies can be useful if you’re anticipating an Inheritance Tax bill.
Life Insurance 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. And is cheaper as a result.
Do I need Critical Illness Cover?
Critical Illness Cover plans provide a lump sum if you’re diagnosed with one of a large number of specified illnesses. The cover can be for a specific time period or for your whole life. Given that we are all living longer, a critical illness policy may be one of the most important for your future financial resilience.
Why protection matters
Taking out life assurance or critical illness protection could be the most far-sighted and potentially life-changing pieces of financial planning you’ll ever do. Do speak to us if you’d like to discuss protection in greater detail. .
The levels and bases of taxation, and reliefs from taxation, can change at any time and are generally dependent on individual circumstances.
Trusts are not covered by the Financial Conduct Authority.
Sources
1Association of British Insurers, accessed October 2024
2Statistica, accessed October 2024
SJP Approved 04/03/2025
