Protection offers a vital safety net to fall back on when the unexpected happens. For example, if you become ill and can’t work, you might find it difficult to cover your living expenses and contribute to savings for the future. Equally, if you die suddenly, your family could struggle financially if you haven’t put measures in place to support them.
Fortunately, protection such as life insurance, critical illness cover, or income protection could help in these situations. The regular payments from income protection may allow you to continue working towards your financial plan even if you’re not earning. Similarly, a lump sum from life insurance or critical illness cover might help your family pay the mortgage, manage their living expenses, or save for the future should the worst happen.
Some people fail to take out protection at all and this leaves them vulnerable. However, even if you do have protection, it might not be adequate if you haven’t updated it for a while.
Indeed, according to FTAdviser, only 47% of people in their late 40s have adequate life cover. This may be because they don’t review their protection needs as their life circumstances change.
Read on to learn about five important life milestones when you may need to update your protection.
1. You’re getting married or divorced
When you get married or enter a civil partnership, you may want to adjust several aspects of your financial plan so you and your partner can build and manage your wealth together.
For example, it may be beneficial to take out a new joint life insurance policy as it can be cheaper than two single policies, in some cases. A joint policy covers you both and pays out once when one of you passes away. You can typically decide whether it pays out on the first or second death. It may be important to consider which option is most suitable for your financial situation and when the extra funds are most needed.
Meanwhile, if you divorce, you will likely want to cancel any joint protection policies and take out a single policy for yourself instead. You may also need to update your chosen beneficiaries, so your ex-spouse or civil partner doesn’t receive a payout in the event of your death.
2. You’re having children
Having children may significantly change your financial responsibilities and it’s important that you have adequate protection to support them should something happen to you.
According to LV=, the average cost of raising a child to age 18 in 2024 is £166,000 for a couple and £220,000 for a lone parent.
Consequently, if you purchased protection before having children, the level of cover may not reflect your current expenses now that you have a family.
You may want to adjust your life cover to include the full cost of raising a child so if the worst does happen to you, your family are taken care of. It may also be useful to change how much of your earnings are covered by income protection to account for the increased expenses associated with having children.
3. You’re moving into a new home
If you’re moving into a new home, the amount of debt you hold could change. For example, if you move into a more expensive house and take out a larger mortgage, you may have increased financial obligations. Meanwhile, moving to a smaller home could decrease this. Either way, this could affect your protection needs.
Unless you review it, your protection might not cover your mortgage should you die, and this could leave your family in a difficult position. Additionally, your mortgage payments might be higher, and you may need to increase your income protection cover to account for this.
Bear in mind that the value of your home could change over time, and your mortgage payments might increase or decrease as interest rates change. As such, it could be useful to check your protection regularly, even if you haven’t moved house.
4. Your earnings have changed
When your earnings increase, your lifestyle may change too. You might spend more in certain areas and you may contribute more to savings and investments for the future. As a result, it could cost more to maintain your new lifestyle.
If you purchased protection before your earnings increased and didn’t update it, you and your family may have to downgrade your quality of life if you’re out of work or one of you passes away. This is because your protection might not pay enough to fund your new lifestyle.
Additionally, when starting a new job, you may want to check what benefits your new employer offers. For example, they may provide “death in service” benefits that pay a lump sum to your family when you die. In this case, you might not need to purchase as much protection for yourself.
5. You’ve made positive lifestyle changes
The cost of protection is typically based on several factors including your age, health and lifestyle. If you’re older or have existing health conditions, your premiums may be higher. That’s why it’s often beneficial to purchase protection when you’re younger.
Usually, as you get older and potentially develop more health issues, the cost of protection rises. Yet, if you make positive lifestyle changes, protection may be more affordable.
For example, if you quit smoking or lose a significant amount of weight, you may reduce your chances of developing certain health problems. Consequently, you may be able to save money or benefit from more cover if you adjust your protection.
By reviewing your protection when you reach these important milestones, you can ensure that you and your family are prepared for anything that life throws at you.
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We can help you understand your protection needs and put these important safety nets in place.
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Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.
Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.