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  • Gary Lumb

1 in 3 people say financial protection is too expensive, but can you afford to overlook it?

Updated: Mar 27


Financial protection can provide you with a lump sum or regular income when you need it most, for example, if you’re unable to work due to a long-term illness.


Research finds it’s something many people are putting off because they deem it too expensive, but you might be surprised by how affordable it is.


According to a report in Professional Adviser, the pandemic has led to more people considering their ability to weather financial shocks and more are taking steps to improve their resilience. Despite this, 31% of people also said that the cost of financial protection seems too expensive to consider taking out.


Many myths surround financial protection and the perceived cost puts many people off. Yet, it could be much cheaper than you think. A report in Your Money found that life insurance cover of £100,000 for a non-smoking 30-year-old can start from as little as £4.36 a month.

Of course, many factors will affect the cost of financial protection, including the level of cover you need, your health, age, and lifestyle. But the findings indicate that for many families in the UK, the peace of mind financial protection can provide doesn’t have to cost a fortune.


Can you afford not to take out financial protection?


Even if financial protection is cheaper than you expect, it can still seem like an additional expense you can do without or something that you don’t need. Needing to claim financial protection is something we all hope to avoid, but it can provide a vital safety net when the unexpected occurs.


Financial protection is often used if you are unable to work for a long period due to an accident or illness. Depending on the type of financial protection you choose, it could pay out either a regular income or a lump sum. This money can help you cover outgoings if your regular income has stopped and gives you time to focus on recovering.


If you didn’t have financial protection, how long could you meet essential expenses?

You may have an emergency fund in a savings account or other assets you could use if your income stopped, which can be useful for short periods when you don’t have an income.


Financial protection isn’t designed to replace these steps, but rather complement them. Receiving financial protection can mean you’re more financially resilient and in a position to deal with short- and long-term shocks if something happens.


There are also other benefits to taking out financial protection, including:

  1. Keeping your long-term plans on track: While you may be able to dip into savings or other assets to cover outgoings, will this affect your other plans? Needing to sell investments now, for example, could mean you need to delay retirement.

  2. Improving your peace of mind: Knowing you have a regular income or lump sum from financial protection to fall back on can mean you’re not worried about your financial future. It means you can focus on what’s important to you.

3 questions to answer before you take out financial protection


1. How long would your emergency fund last?


Ideally, you should have an emergency fund that covers three to six months’ worth of expenses. Understanding how long your current fund would last can help you choose financial protection that has a deferred period that suits you.


This is the time between when you become too ill to work and when you can make a claim. The longer the deferred period is, the cheaper your monthly premiums will typically be.


2. Would you have any other sources of income?


If you’re unable to work, would you still have other sources of income? This could be rental yield from properties or dividend-paying stocks. Setting out your finances can help you see what the shortfall would be, and the gap financial protection would need to cover.


3. What level of cover do you need?


How much cover do you need to provide you with peace of mind? If you’re thinking about taking out income protection, this will typically be a portion of your wages. If you want to take out critical illness cover, you should consider what large expenses you have, such as a mortgage, as well as day-to-day costs.


While financial protection may not be as expensive as you previously thought, you should still shop around for the right deal for you. As well as ensuring it can provide you with peace of mind and is appropriate for your needs, we’ll help you secure financial protection that suits your budget.


Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.


Most protection plans typically have no cash in value at any time and cover will cease at the end of term. If premiums stop, then cover will lapse.