Do I need personal insurance?

You wouldn’t think twice about insuring your car. How about protecting your home and its contents? Or would you ever go abroad without travel insurance?

These are all things that we’ll happily insure in a heartbeat, but what about the most important thing? Do you know what it is and whether it’s protected?

According to wealth management firm and financial planning services Saltus, the most important and valuable asset is – in fact – you! A serious illness or death in the family can have a detrimental impact on your financial circumstances. And so, ensuring you have the right level of insurance in place, can help to establish a secure financial future for you and your loved ones.

Read on to find out more.

Your most important asset

You may not think it, but you’ll make a significant amount of income in your lifetime. Take the average UK annual earnings of £27,000 as an example. Across roughly 50 years of work, and increasing in-line with inflation, you could see lifetime earnings of over £2.2 million.

What if you are earning £50,000 to £60,000 a year? Well, this number is then around £5 million. £100,000 a year? Then you’ll generate almost £10 million in lifetime earnings, just proving how important your income is and how valuable of an asset you are. This is particularly apparent if you are the highest earner in your family, and your income is heavily relied upon.

However, despite these figures, most do not have any type of personal insurance — 60% in fact. So how would your mortgage be covered if you were to pass away? Or how would you fund your pension if you were to get sick?

These are all important questions to consider, especially if you are a high earner.

Why do I need personal insurance?

Although it may be quite morbid, looking at the rates of mortality and illness across the UK reveals some shocking statics. A study by the Institute and Faculty of Actuaries provides data from which the following conclusions can be made. For a couple in their 30s, there’s a:

59% chance that one of them will be off work with an illness, for longer than two months
27% chance that one of them will suffer a long-term or debilitating illness
9% chance of one them passing away; and a
67% chance of any one of these three events happening

If you focus specifically on cancer as a serious illness, one in two people are likely to be diagnosed with it in their lifetime, and of those, 64% will be under 75.

These facts are important to consider when it comes to your financial planning.

What protection do I need?

Arguably, ensuring you have the right level and type of protection in place, is just as important as contributing enough money to your pension — and both are vital steps to plan for your financial future.

Consulting with a financial adviser will help to combine the right policies for your personal circumstances, but you should consider having the following protection in place:

Life Insurance — where your nominated beneficiaries will receive a sum of money in the event of your death
Income Protection — in basic terms, this pays you a regular income if you can’t work because of sickness or disability
Critical Illness — usually pays out a lump sum if you are diagnosed with a critical illness, such as cancer, suffer a stroke or a heart attack

You may also need to evaluate whether a workplace Death in Service policy can ultimately replace your earnings, as well as considering the portion of net income that Corporate Income Protection will cover. Again, seeking advice from a financial expert can help you with this.

When considering your financial objectives in life, you should also think about the risks that could derail your goals. With the right personal insurance, you can have peace of mind that your lifestyle and income levels will be maintained if you are unable to work, and that your family is provided for when you pass away.

Disclaimer: Information is correct to the best of our understanding as at the date of publication. Nothing within this content is intended as, or can be relied upon, as financial advice. Capital is at risk. You may get back less than you invested.