The Case For Personal Protection Insurance Has Never Been Stronger
Over the past 12 months the UK has been subject to two economic shocks, either one of which would be considered severe in normal times. We’re talking about Coronavirus and Brexit, of course. As we emerge from lockdown it’s expected that consumer spending will be strong. Economists counsel caution, however, as rising unemployment and the economic impact of Brexit could limit the pace of the recovery.
If there’s one lesson we’ve all been able to take from the pandemic, it’s that life is unpredictable. Even the best laid financial plans can be knocked off course by a ‘once in a generation’ event like the one we’ve just experienced. How should we respond? Harpur Wealth Management recognises the importance of creating financial plans that plan for the unexpected. Which means that the case for personal protection insurance is now stronger than ever.
The Insurance Protection Gap for Individuals
At present the provision of protection insurance amongst British households is low. A December 2020 Which? survey found that only 9% of individuals surveyed had income protection insurance, 41% had life insurance, and 16% had private health insurance. This means that relatively few people in the UK have the financial support systems in place to deal with unexpected illness or loss of income.
Types of Personal Protection Insurance
Harpur Wealth financial advisors regularly discuss 4 types of personal protection insurance with clients. Together they can play an important part in estate planning, allow parents to pass their wealth onto their children tax-efficiently, and they can impact inheritance tax planning.
- Life Insurance – pays your dependents a lump sum (or regular payments) if you die. It provides peace of mind that your family is looked after financially, even if you’re no longer there for them. Usually there’s no income or capital gains tax to pay on the proceeds of a life insurance policy.
- Income Protection – pays you 50%-70% (on average) of your income if you cannot work because of illness or injury. Most employers offering sickness pay do so for a maximum of 12 months. Income protection will normally cover you until you return to work, or retire. Payments from income protection policies are tax free.
- Mortgage Payment Protection – covers your mortgage repayments – usually for up to 12 months – if you lose your job or are unable to work as the result of sickness or injury.
- Critical Illness Insurance – provides a lump sum if you become seriously ill. Not all conditions are covered, and in some cases a specific level of severity triggers payment. Typical illness covered are: stroke, types of cancer, heart attack, and multiple sclerosis.
Protection for Your Family’s Future
We can’t control world events, but we can protect ourselves against the financial shocks they engender. Harpur Wealth financial advisors work to ensure that your long-term financial goals for your family can be met, whatever the external events. You’ll be introduced to the financial products that are appropriate to your needs, and should your personal circumstances change, we’re always on hand to help you adapt your plans without compromising your goals.