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Contact us | www.future-financial.co.uk | E-mail your comments | Archive | |
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Protection in a recession By the time you read this article, we could be on our way out of recession; but if we are, the process is likely to be slow.
This is because government borrowing to combat the worst of the recession is so great that taxes may have to be increased in order to help clear it; this will slow the rate at which the economy can grow. So as far as planning your family protection is concerned, thinking in terms of an ongoing recession probably makes sense. There are three principal areas for consideration (plus some thoughts on costs). Life insurance Probably the worst thing that can happen to any family is to lose a member. However, in the case of a breadwinner, the emotional impact is magnified by the potential financial consequences. It is not just the principal earner that needs to be insured; in many families, both parents earn and even where one is able to take time off as a carer, there is a significant economic value in the contribution that they make towards the family’s economic wellbeing. After all, the family still has to be fed, cleaned, ferried about and generally cared for, even if one of the parents is no longer available to do so; this means paying someone to do the job, or the remaining parent giving up some earning capacity to fulfil this important function. Income protection Of course, it is not just death that can hit a family’s finances. Long term unemployment or illness can be devastating in so many ways and it is important to ensure that there is adequate insurance to provide a replacement income should one of the earners or family carers become incapacitated, or economically inactive. This can be arranged in a number of ways, including through accident, sickness and unemployment insurance, or using permanent health insurance. The former generally only covers an individual for up to one or two years and is renewed annually; the latter (which will not cover unemployment) is more usually written for a long time such as up to 60 or 65 and usually carries a level monthly premium. Private medical care It may sound strange to be talking about private medical insurance in an economic downturn, but however much governments may say they will ring-fence spending on the NHS in future, unless money is correctly targeted, the service will remain under-resourced. Unfortunately, the recession could also lead to an increase in demand for some aspects of medical care, especially if it leads to more cases of depression and similar conditions which can be resource demanding. This means that having private medical insurance should remain a priority for many families. Review costs Just because insurance is important, it need not be expensive. In fact, some forms of insurance are generally less expensive than a decade ago due to enhanced medical knowledge and new treatments. This is particularly the case with life insurance and it is worthwhile considering whether the cost of existing cover might be reduced, or more cover obtained for the same cost. Key Points: > Family financial protection remains important > Some covers are even more important in a recession > Some premiums can be lower than previously |
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©futurefinancial This publication represents our understanding of law and Inland Revenue practice as at the date of publication. It does not provide individual tailored investment advice and is for guidance only. Rules may vary for Scotland and Northern Ireland. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor. The value of land and buildings is generally a matter of a valuer’s opinion rather than fact. The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. If you withdraw from an investment in the early years, you may not get the full amount you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Your home may be repossessed if you do not keep up repayments on your mortgage. Loans are subject to status and written details are available on request. Always seek independent advice from a qualified financial adviser. Think carefully before securing other debts against your home. Fees for mortgage advice maybe charged and for details of these please contact us. The Financial Services Authority does not regulate all the activities undertaken by the company, including taxation advice and overseas mortgages. |
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