Life can be seriously bad for your wealth
Too few people have the right insurance to protect themselves when life-changing events happen
THEY say a cat has nine lives but when it comes to money, the average person lives through nine financial lives.
We will all get hit with at least eight life-changing events pushing us into the next chapter of our life – and giving our finances a big knock.
These include two periods of serious ill health, two career changes, the birth of a child, a divorce, a redundancy and even the death of a partner, researchers found.
And it looks like younger people may have to go through more twists and turns than ever as one in four 18 to 38-year-olds have already been made redundant, one in three have changed careers and one in four have been through a divorce.
The study, by life insurance broker LifeSearch, reveals these events are taking their toll on people’s finances as more than half say they have been through more financial instability than they expected and worry about their family’s finances.
Despite this, many people aren’t taking the necessary steps to protect the quality of the life they love.
Breadwinners
SIX out of 10 people haven’t got any financial protection such as life, income or critical illness cover. And despite the number of female breadwinners rising by a third in the last five years, one in five women still leave financial planning to their partner.
The payment protection insurance fiasco – where banks hijacked a good and necessary financial product, charged rip-off rates and mis-sold it to people who would never be eligible to make a claim – put many people off taking out protection cover.
But it is vital everyone has their finances protected, with the right cover at the right price.
Emma Walker, insurance expert at LifeSearch, said: “When take a look at how many changes we’ll encounter in 21st-century life, it’s hard not to feel apprehensive about some of the hardships to come.
“The fact is, we all spend time building lives for ourselves and hoping for the best. But, unfortunately, we also need to plan for the worst. Like cats, many of us now have nine lives but, unlike cats, sometimes we don’t land on our feet.”
HAVING FINANCES PROTECTED IS VITAL
VANESSA Taylor was at the peak of her career teaching primary school children when her life was turned upside down.
She was diagnosed with an aggressive form of leukaemia and ended up being retired early on ill health grounds. She now struggles to pay her bills.
She had critical illness cover years ago but cancelled it, thinking it was too expensive.
Vanessa, 52, from London, who lives with her 11-year-old daughter, said: “I was retired the day before my 50th birthday on a pension that is a third of my salary – but with all the same bills to pay. I get a bit of financial help through a PIP (Personal Independence Payment) due to my health, but that’s still not enough to live off.
“I have to apply for PIP each year, so worry it might stop any time. I’m using savings that will run out in the next couple of months to stay afloat.
“When I first started working, I had critical illness cover and paid it for years. Then I stopped when I had my daughter as I had to pay childcare.
“When you then go back and try to take it out again, it gets more expensive and I was priced out of it. How I wish I’d pushed myself and never stopped it. When I was in the depths of my illness, one of my biggest concerns was my finances.
“If I’d still had critical illness
When I was in the depths of my illness, one of my biggest concerns was my finances
cover, life would have been a whole lot better - I could have focused on the important task of getting better. It would have lifted such a big worry. "I'm in remission but still at high risk of infection so I can't go into a workplace. "I have turned to writing a book, Baller Boys, which comes out in May. I'm hoping this could turn into a new career and give me the means to earn money"
WHAT TO CONSIDER WHEN TAKING OUT COVER
Everyone's situation is different and there isn't a one-cover-fits-all product. DP you are working, the first thing to do is check what benefits you get through your employment. Some jobs offer a death-in-service benefit and decent sickness pay. Find out what you get and speak to a financial adviser about what top-up cover you may need to ensure your finances and family are protected.
Here, Emma Walker shares tips on what to think about when considering life and sickness protection:
Starting out
When you are young and single – without many assets or dependents and living at home – protection isn’t likely to be a priority.
However, you should bear in mind that life cover is cheaper the younger you start paying for your policy.
Laying foundations
As your career advances and you settle down, this is the time to think about who would pay the rent or mortgage or support your partner if you became critically ill, or even died. Some level of critical illness cover will mean finances are much less pressured should the worst happen.
Depended upon
If you have a mortgage, a partner and/or young children, and especially if you are the household breadwinner, it’s time to take protection more seriously.
Life cover will not only enable your partner to meet costs if you die or become seriously sick, but can also mean long-term financial support for your children if they have to grow up without you.
Also, don’t forget to consider protecting a stay-at-home parent who isn’t earning.
If they became ill, the breadwinner may need to take a break from their career to care for younger children to help give them some stability.
That will have a cost.
Peak earning
During your 40s and 50s is usually when your earnings peak.
But while your childcare costs, mortgage or other financial responsibilities may start to ease, helping grown-up children with university fees and planning for later life presents new pressures on your cash.
At this stage, income protection can ensure that you’ll be able to maintain a similar lifestyle should you be unable to work, as well as keeping your long-term financial goals on track.
Retirement and beyond
As you head towards giving up the nine-to-five grind, your income typically becomes less crucial.
But you may wish to ensure that if you die earlier than you expect to, then your partner and children will be looked after financially.
Funeral costs are also a consideration at this stage of life.
You should also ensure you have made plans for your pension income to be passed on if possible, so dependants are supported.