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There is a lyric from Baz Lurhman’s song, ‘Wear Sunscreen’, that goes; “Don't worry about the future……The real troubles in your life are apt to be things that never crossed your worried mind”

The majority of my posts so far have been about making positive steps to build future financial confidence. However, life can be unpredictable.

It’s not something we like to think about – especially at a young age – but injury or illness can affect anyone at any time. It’s worth taking a moment to make sure you have a financial safety net should the worst happen.

Even if you don’t have a mortgage or children, you may still need to pay rent and bills if you are unable to work because of illness or injury.

So let’s make this quick. Read this blog. Work out what cover you need. Sort it. Get on with your life.

Income Protection

At this stage, we are unlikely to have a rainy day fund sufficient to replace our income. So what happens if we are not earning due to long term illness? State support (benefits the government offers if you are out of work) is generally lower than you might expect, and if you have essential bills to pay, it’s probably a good idea to look at income protection.

Income protection provides a regular income if you are unable to work due to sickness or a disability. You can protect a proportion of your gross salary, which will continue until you return to your job or you choose to retire.

Many people only look to take out income protection after a major lifestyle event, such as the birth of a child or taking out a mortgage. However, it really should be considered by any person, young or old, who would struggle to survive without an incoming salary.

Critical Illness Cover

Critical illness cover is designed to cover a specific list of serious illnesses or treatments ranging from cancer to heart surgery. It works by providing a tax-free lump sum to help pay off any outstanding commitments – such as your mortgage, debts – or pay for house modifications. It is designed to complement income protection, if you become seriously ill and are unable to work.

While we all like to think of ourselves as fit and healthy, anyone can be hit by illness. Ensuring you have a safety net could provide you with financial stability at a time when your world is turned upside down.

Life Cover

I don’t want to get morbid, but it is worth looking at financial considerations for when you die. Unlike Income Protection and Critical illness is paid out on your death. As such, it is something to consider primarily if you have certain financial commitments, such as a mortgage or debts, or if you have other people who depend on you.

Also known as life insurance, this will play an important role in making sure your family is taken care of financially. It’s not a nice to think about, but it is definitely worth it.

Considering Cost

The majority of us will have insurance for things like our phones, cars and maybe home and contents. Why? Because we probably couldn’t afford to replace these items outright if they break or something goes wrong.

So why is insuring your financial future any different? One of the major benefits of taking out protection at an early age is that it is cheaper, so it might not cost as much as you think. This does depend on individual circumstances so do some digging and see what quotes you could potentially gain – if in doubt get advice on what cover(s) best suit your needs.

Like any insurance, there is the possibility that you might not use it. You have to weigh this cost against the potential value it would provide in the worst-case scenario.

Before you start…..

Just a quick time saving tip from me. If you are employed, check your contract to see what protection, if any, your employer already offers.

On writing this post, I hadn’t actually considered my own protection needs. I went off and looked up various policies online and it only occurred to me later that I should have a look at my contract.

It showed I already had sufficient cover provided by my employer and buying more would just be a waste of money. So, take care not to buy something you don’t need and, if in doubt, seek professional advice from a qualified adviser.

Disclaimer: The information provided through the Equilibrium website is based on our opinion and is for general information purposes only. It is not, and should not, be construed as financial or investment advice.