How long is it since you reviewed your financial protections?

January 17, 2025

An important aspect of any financial decision is peace of mind that your finances are protected from the impact of the unexpected, and that you can meet your ongoing commitments.

At Talis IFA, we recommend that your protection needs, and existing arrangements, are reviewed as part of a holistic financial planning process, to ensure that you have the cover you need and it suits your personal circumstances. That way, you can be confident that you are getting value from your premiums, and that you and your family are insulated against financial risk.

It pays to have financial protection from the unexpected

Many people believe that insurance policies are expensive, or not worth it. But the reality is that most insurance companies have a very high payout rate in the event of claims, often over 90%. When claims are rejected, a high proportion are due to the customer having withheld, or given incorrect information when the cover was applied for. 

What type of financial protection are available?

An in-depth discussion about your personal circumstances, health and financial commitments will allow your IFA to search the whole of the market to find the most cost-effective and appropriate policies for you.

Here’s our introduction to some of the most common types of financial protection:

• Income protection insurance policies

Income protection is designed to provide you with a reliable income should you not be able to work due to illness or an accident.

It will pay out a percentage of your regular salary each month. Your IFA will help you to assess how much of your salary you’ll need to keep you going.

Income protection insurance usually begins to pay out after a deferment period, which varies from weeks to months, depending on the options you select. So you will also need to ensure you have savings or another source of income to cover the initial deferment period.

Income protection policies will continue to pay out until you’re able to return to work, you retire or the policy term ends. The premiums will vary depending on the percentage of your salary you need to cover, the deferment period, and the term. 

Your IFA will help you to work out the most appropriate options for you.

• Mortgage payment insurance

This is a type of policy specifically designed to pay your monthly mortgage payments if you can’t work because of illness, injury, or redundancy.

After a deferment period, usually at least 30 days, but sometimes up to 180 days, your insurer will pay a set amount each month to cover your mortgage payments. You can also specify cover up to around 125% of your mortgage, to cover your household bills. 

Your policy premiums will depend on the amount you’re insuring, the deferment period, and the payment period. Most mortgage protection policies pay out for up to 12 months, or until you return to work, depending on the specific terms you choose.

• Critical illness cover

Critical illness cover can provide a lump sum if you are diagnosed with any condition specified in the policy conditions. This can be used how you wish, from paying essential outgoings to adapting your home if necessary. 

It’s important to understand that claims will only be paid for conditions covered by your specific policy but most include what is known as ‘total and permanent disability’.  In other words, if an accident or serious illness results in a very high degree of disability that you won’t ever recover from, you are likely to be covered under this condition. 

• Life assurance

If you have financial dependents, it might be worth considering a life assurance policy, or policies, which will pay out a lump sum on your death and provide financial security for loved ones, long after you’re gone.

Life assurance payments can be used by your dependents however they wish, including the payment of an Inheritance Tax (IHT) bill which is usually required before probate is granted.

Choosing financial protection products – ask your IFA

With so many options to choose from, it’s a good idea to consult an IFA, rather than simply take out a policy that you’ve seen advertised, or because your bank or mortgage provider recommends it. It’s vital to understand the ‘small print’ to make sure the cover is appropriate for your circumstances and covers your needs.

Your IFA will look holistically at your circumstances, financial commitments and dependents before making recommendations; considering:

• Existing cover: for example a policy you’ve taken out in the past or something offered through your employer. Making sure that any new policies will complement existing ones helps ensure you’re getting best value for money.

• Deferral period: The longer the deferral period, the lower your premiums will be. But you take into account how much sick pay your employer offers, how long sick pay is paid, and any other financial safety net you have available to you to avoid a shortfall.

• Level of cover you need: balancing your financial needs against premiums. What lump sum would provide you with peace of mind? How much regular income do you need to meet essential outgoings? 
• Health and lifestyle: It’s important to be completely honest with your IFA when applying for cover, as the main reason for insurers refusing claims is when information has been withheld.

• Premiums: Premiums for financial protection are often lower than clients expect. The exact amount will depend on several factors, including the level of cover, deferment period and payment term, as well as your health and lifestyle. 

Working with an experienced IFA will ensure that you have the appropriate protections in place for your circumstances, financial commitments and long-term goals.

At Talis IFA, we recommend regular financial reviews, and to consider financial protection as an integral part of your financial plan. We’re always transparent about our fees upfront – giving you confidence that our recommendations are objective and based on your best interests, 

To get our help to protect your financial future, find an IFA here.