The Government’s furlough scheme has been a lifeline for many costing upwards of £46bn and providing income to millions of British workers. At its peak around 8.9 million people were furloughed.
It has also been a wake-up call.
Without it many would not have made it through the lockdowns of 2020 or be able to cope with the current restrictions. While the events of last year were unique in their severity and impact, the need for the furlough scheme serves as a stark reminder that preparing for the unexpected in your financial future is vital.
Furlough will not always be there
There is light at the end of the tunnel, but Covid is not beaten yet, and as it has shown, the unexpected can strike at any time. Businesses fail, accidents happen, and illnesses can strike.
When it is not a global emergency, you cannot expect the government to help. Bills still need to be paid and your family needs food on the table, even if money isn’t coming in.
Simply being unable to work could put your home and your loved ones at risk. If you were to die, they may have financial stress to add to their grief.
At Continuum we see financial protection and tailored financial safety nets as core to our financial planning.
What is a financial safety net?
A financial safety net is a package of an emergency fund for example cash on deposit maybe between three to six months expenditure and possibly insurance products designed to protect you and your family, whatever the future holds.
The first product is Life insurance. This is vital, especially if you have a spouse or other dependents. It could pay off the mortgage*, ensuring that your loved ones can keep their home, and provide a cash lump sum to help replace your income. There are many insurers, and many different types of life cover. Getting the most appropriate policy could mean more protection – and less to pay.
Getting the right level of financial protection, with affordable premiums as well as protection you can depend on will probably mean getting expert help.
While the need for life insurance is well understood, many people leave themselves vulnerable if illness or injury were to make them unable to work.
As Covid has shown, illness can strike at any time. So, another product in your safety net should be Critical Illness Cover (CIC). This pays a tax-free lump sum if you are diagnosed with any of the illnesses listed in the policy, which usually include most cancers, heart attack and stroke. Like life insurance, it can be arranged at a level to pay off your mortgage* and to provide a replacement income.
You may also need Income protection insurance as part of your safety net. There are two main types.
The first is Permanent Health Insurance or PHI. This pays a proportion of your salary in the event of illness or a debilitating accident that stops you working permanently and can continue until your normal retirement age, providing the premiums are maintained.
The other is Accident, Sickness and Unemployment (ASU) cover. This can provide a replacement income in the event of illness, accident or redundancy for a maximum of 12 or 24 months.
The Continuum team can help you see the level of cover you need, and the best way to provide it.
Creating your financial safety net
With the pandemic showing how vulnerable we all are, many more people are looking to income protection, and providers are offering new terms and products.
Greater flexibility in cover, and greater choice could make it even easier to get the financial protection you and your family need.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable Protection products or investment strategy, you should seek independent financial advice before embarking on any course of action.
*Your home may be repossessed if you do not keep up repayments on your mortgage.
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