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Revisiting Protection in 2020

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To say that 2020 has been a challenging year is an understatement. Some people have faced ill-health (physical and / or mental), others have lost their job and the rest of us are coming to grips with the readjustment of our daily lives. A silver lining however is that we have all had more time to think and reflect, and more so than ever this feels like a prime opportunity to ensure that our financial affairs are in order. One key element of this is making sure we have adequate protection provision in place.

Protection is relevant for almost everyone; those who have just taken out a mortgage, those with dependent children, those with little disposable income, businesses with key members of staff, etc.

There are many types of protection products. Most of us understand that life cover pays out when you pass away. Income protection is a long-term insurance policy which provides a replacement income if you’re unable to work through illness or accident. Critical illness cover pays out a lump sum in the event you are diagnosed with one of the specific medical conditions listed in your policy. These are just a few examples of the many products available.

When setting up a policy there are various decisions to make such as whether the sum assured should be level, increasing or decreasing or how long the policy should run until. Another example in respect of income protection is deciding on a suitable deferral period – "realistically, from the first day of you being unable to work through illness or accident how long could you get by financially before you'd need to claim on your policy?" Answers to questions like these will likely have an impact on the premium you pay.

Unsurprisingly, since the outbreak of Covid-19 it has been reported there has been a spike in consumers taking out income protection and other production products directly. Although this is promising, care must be taken in setting up policies that are good value and meet our individual needs. This is where the help of a Financial Adviser is likely to be of benefit. They can provide advice on the financial soundness of an insurer, whether a menu plan (which is several protection products combined) would be more cost effective, whether your life policy needs setting up in trust, etc. Furthermore, an Adviser would also be able to review whether any existing policies you have remain suitable. 

Protection policies can be something of a taboo subject; it is human nature to avoid thinking about tragedy be it death or illness. Covid-19 has reminded us how unpredictable life can be however. These policies provide us with peace of mind and a financial safety net. If you have any concerns regarding your protection provision it is best to act now.

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