Protecting your finances

You wouldn’t think twice about driving a car without car insurance, or going on holiday without travel insurance, you probably wouldn’t own a pet without pet insurance and for some people the idea of having a mobile phone without mobile phone insurance is unheard of. But what’s more important than a car or a holiday? And definitely more important than a mobile phone?… well, you are. So why wouldn’t you want to insure yourself?

While it might not be the most exciting topic, financial protection can be a useful way of protecting your financial commitments such as rent, should something unexpected happen.

There are three main types of insurance to consider when it comes to financial protection, which are:

Income protection

If you’re working and rent or own your own home it’s more than likely that a lot of your earnings will go towards paying for your essential household bills such as rent, gas and electricity. And, some of your earnings will go towards more exciting things like savings for a holiday, new clothes, or if you’re like me most of it will be spent on food.

But what would happen if you became too sick or injured to work?

All those bills still need to be paid and you still need to live. Some employers might provide some financial support for a short amount of time, others might not. And if you’re off work for a long time how will you manage?

Income protection pays a specified percentage of your salary as a weekly or monthly income if you’re unable to work because of a long-term illness or injury. The money can be used to pay bills, debts and other costs that will allow you to focus on getting better.

Life insurance

This is one of the more common types of financial protection. It pays a lump sum of money if you were to sadly pass away. But I won’t be able to spend it? I hear you say. Well, that may be true, but life insurance is more about providing financial protection to your loved ones.

If you’re married or in a civil partnership, have a family or own your own home then a lump sum of money could provide loved ones with financial support at a really difficult emotional time. It could be used to pay off the mortgage on your home and it could even go towards paying for a funeral.

Critical illness insurance

If I could predict the future, I would like to think I’d be writing this while sitting on a yacht in the Bahamas. Sadly, it’s impossible to predict the future because you never know what’s around the corner. For your health too, eating well and exercising will contribute to a healthy lifestyle but that will not remove the risk of developing a critical illness at some point in your life.

This is where critical illness insurance has a role to play. If you’re diagnosed with one of a number of specified critical illnesses such as a heart attack or a stroke or even if you have to have a particular type of medical treatment then the insurance will pay out a lump sum of money to help you during this difficult time.

So, when thinking about insurance, never forget the most important factor, which is you.

A blog post by Gregor Sked

Gregor has been working within the financial service industry since 2013. Most of his early career was spent at Standard Life where he was a presenter in the workplace pension team. He joined Royal London in 2018 to spend more time on financial protection. Gregor is involved in developing adviser facing content, presenting, writing articles and commenting for the press. Gregor is also studying towards a Diploma in Financial Planning through the CII.

For more on the above and other money subjects, check out the Your Money Matters here.