Life can be seriously for your wealth
TOO FEW HAVE INSURANCE TO PROTECT AGAINST UPHEAVAL WARNS
THEY say a cat has nine lives but when it comes to our 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, exclusive research for Your Money has 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 over half say they’ve been through more financial instability than they expected and that they worry about their family’s finances.
Despite this many aren’t taking the necessary steps to protect the quality of the life they love.
Six in 10 people haven’t got any financial protection such as life, income or critical illness cover. And despite the number of female breadwinners – up by a third in the last five years – one in five women still leave all financial planning to their partner.
The payment protection insurance fiasco – where banks hijacked a good and necessary financial product, charging rip-off rates and mis-selling 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 we stop and take a look at how many changes we’ll encounter in 21st century life, it’s hard not to feel somewhat 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, we may have nine lives but, unlike cats, sometimes we don’t land on our feet.”
WHAT TO CONSIDER
WHEN TAKING OUT COVER
Everyone’s situation is different and there isn’t a one-cover-fits-all product. If 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 her tips on what to think about when considering life and sickness protection:
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.
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.
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.
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.
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.