Introduction
Continuing our series of the ultimate guide to wealth protection, this is a shorter post which I hope really highlights the importance of having it in place. Many finance gurus skip over this subject, which makes me cross. But that also means that lots of ordinary folk skip over it too.
Why You Need Wealth Protection
Let’s face it; insurance – for that is a large part of what we’re talking about – is not something any of us is eager to spend money on. We pay ALL insurance grudgingly, hoping we never need it. But if we do need it, we’re glad it’s there. As a financial adviser, it can be hard to sell people on the benefits of life insurance and other kinds of policy, but I’ve been doing my job long enough to have some stories.
Like the client who lost his wife suddenly, only in the past few months, and had two children under ten years old. When he rang my colleague Chas to confirm that the life insurance would pay out and what the number would be, he wept with relief. It has meant he can pay off the mortgage and take as much time off as he needs to get used to the hideous situation he finds himself in and be with the kids through it all.
On the other side of the coin there the time when I had a client couple who were divorcing. She cancelled her life insurance which had critical illness cover included. Despite repeated letters from the insurer, plus messages from us left on her answerphone and emails checking that she had meant to cancel the direct debit, we never had any response, so the policy lapsed.
Four weeks later she was diagnosed with breast cancer. The policy would have paid out £400,000. She rang and begged us to see if a claim would be honoured, but no joy. Insurance companies give a period of grace, but once that’s over, it’s no dice That was a bad day for me – I wept like a baby – but a much worse day for her.
Choosing not to protect your wealth by laying a sure foundation of insurance is a risk. You’re challenging the universe to a game of Russian roulette. It might pay off, but it might not, and that in itself is something you’ll have to reconcile yourself with.
When talking about investing, we advisers often talk about capacity for loss, in other words, how much can you afford to lose without it affecting your planning aims – that informs how your money should be invested. But we often don’t use that same language for insurance. How dependent on your income are you? That’s a key question to answer…
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