Protecting Your Hard Earned Money

Having read John’s article – The four pillars of financial freedom – I thought I would make write about one aspect that he touched on very briefly in the section entitled Making regular savings and investments.

John quite rightly points out that nearly 50% of UK households have savings that are less than or equivalent to one months income. Now, I haven’t researched the relevant statistics for this claim, so I cannot possible agree or disagree with the accuracy of the figures.

However, in my experience as a mortgage advisor, I would agree that a large proportion of the UK population have little or no savings, living each month from hand to mouth. In most cases, the reason they have got into financial difficulties in the past is through having a period of time without any income through unemployment, illness or injury.

In many cases, they could have avoided this situation by taking out various protection products, which are designed to protect against adverse circumstances, like loss of life, loss of job or loss of ability to work and therefore earn money. These products are useful for those that have no savings, as they can provide a safety net where there is none. They are also just as valuable to those that do have significant savings, as they can minimise the need to dip into those savings, should they suffer any interruptions to their income.

At this junction I should probably explain what products I am talking about, and how they can be used.

• Life insurance, which can be used to repay a mortgage (or any liability) in the event of death.
• Family income benefit, which can be used to provide an income to your surviving family in the event of death.
• Critical illness cover, which can also be used to repay a mortgage (or any liability) in the event of diagnosis of a specified critical illness.
• Income protection, which can be used to protect your income in the event of illness or injury.
• Unemployment protection, which can be used to protect against loss of job through no fault of your own, it won’t usually protect you in the event of being sacked.

There is of course a price to be paid for each of the policies that you take out; the price will largely depend on your age, medical history, smoker status and occupation. The key to saving money on these products is to shop around, get good advice on what products to take out and take them out when you are young, as they will increase significantly with age.

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