Personal protection is a key part of any successful investment plan. What good is it to grow your investments and build your wealth if you leave yourself vulnerable to things like redundancy and critical illness? Without adequate protection, your family could face significant financial hardship if you or your partner dies unexpectedly. Having personal protection means that you do not have to worry about money during a difficult time.

Types of protection available:

Income protection

Whether you’re a business owner or an employee, it’s easy to take your regular income for granted. But what if something was to happen to you so you couldn’t work, or earn your regular income for a set period of time, or even permanently? How would you and your loved one’s cope? And even if you could cope for a short time, how long would it be before you started to feel the pinch?

Income protection cover is one option that could enable you to carry on if you did lose your income for any reason. If you are in the early to mid-stage of your career, your income is going to be one of the most important issues for you. Depending on your circumstances, you may be looking to get on the property ladder or start a family. Whatever your ambitions, in most cases you’ll need a regular income to achieve them.

That’s why we believe that income protection policies are an important consideration for our clients. Yet, for many people, the cost of income protection compared to, say, a life insurance policy, can be prohibitive. Often, the reason why income protection may seem expensive is because you are far more likely to need it – and benefit from it. That’s why we will always sit down with you to balance the relative costs against the potential benefits and discuss your attitude to risk, before advising on whether income protection is right for you.

Critical illness cover

Nobody wants to think about the prospect of becoming critically ill. The impact that such an illness can have on your income, whether you are a business-owner or a salaried employee, can be huge. As well as the economic impact of being diagnosed with a serious illness that affects your ability to work and earn a living, you also have to take the emotional effects into account.

If you suffer a heart attack or are diagnosed with a critical illness such as cancer, the last thing you need is additional worries about how you’re going to keep paying the bills or supporting your loved ones. So, investing in a policy that covers you in such an eventuality could take that potential additional stress away from you, so you can focus on your health, rather than your finances.

Critical illness cover does exactly what it says on the tin – it covers you in the event that you are diagnosed with a critical illness and can no longer work. It usually pays you a lump sum that you can use to either pay for treatment or support your family and loved ones, allowing you to focus on your recovery.

It differs from life insurance, which only pays out when you die. However, both types of cover are often provided in combination, so it’s important to talk to us about the best policy to meet your needs. For example, if you already have a life insurance policy, we will be able to advise you on which critical illness cover would be best for you, without duplicating your life cover.

Life insurance

Nobody wants to think about the prospect of dying, or what they will leave for their loved ones when they are gone. But if you want to leave your family something in the event of your death, then putting in place a life insurance policy is one way of making sure that they’ll receive what could be a substantial lump sum.

Compared to other forms of cover, such as income protection or critical illness cover, life insurance policies are relatively inexpensive. The main reason for this is that, although death is unfortunately inevitable, the majority of people can look forward to a long and relatively healthy life. This means if you take out a policy in your 20s or 30s, there’s a very low likelihood that the insurance provider will need to make an early pay-out.

There are two main types of life insurance policy – term insurance, which pays out if you die within a specified period of time, and whole-of-life insurance, which pays out no matter when you die.

Term insurance can be useful if you want to make sure that your loved ones have the funds they need to pay off any outstanding debts. You can set the term of the policy so it coincides with the term of, for instance, your mortgage.

Whole-of-life insurance can be a tax-efficient way of passing on your assets, as the beneficiaries usually don’t have to pay any capital gains tax or income tax on the payment they receive. However, there are tax implications if the payment takes the value of your estate above £325,000, as this could make it liable to Inheritance Tax (IHT) at 40%. This is why it’s important to talk to an IFA such as Grosvenor Wealth Management about the most appropriate policy for you.

We will advise you on the best approach – for example, it may be beneficial to write your life insurance into a Trust to avoid IHT. But each case will be different, so we’ll give you the right guidance depending on your individual needs and circumstances, as well as those of the people you want to receive any pay-outs.

If you are keen to know more – request a call back for a no obligation consultation.