Benjamin Franklin famously said that “the only things in life that are certain are death and taxes” – true in his day and, despite our healthier 21st century lifestyle and advances in medical care, still true today. Immortality is not yet within our grasp!
So, on the face of it, planning for our eventual demise should be relatively easy since it is such a certainty. The problem of course is not the “if” but the “when”. If only we knew when we are destined to “shuffle off the mortal
coil”, planning for it would be relatively easy! The other nettle to grasp in terms of how we plan for our passing is that, whatever steps we take, we ourselves will never see or feel the benefit. So it’s those who remain behind after we’ve gone that we have to think about.
Other “unmentionables” are even more challenging in terms of how we plan for them, because, unlike death, they’re not certain to ever happen. Redundancy, for example, is part of modern life and can affect just about anyone of working age, and sadly, none of us can ever predict whether we, or someone close to us, will be struck down with a serious illness or become disabled.
Providing financial protection for ourselves and for our nearest and dearest against the “unmentionables” is a vital part of good financial planning. It’s a sobering thought that, statistically, for a couple both aged 25 and in good health today, there’s still a greater than one in four chance that one partner will suffer serious long term ill-health or will die before they reach age 60.
Therefore, failing to consider these possibilities as an integral part of your planning is like playing a sort of Russian roulette with your financial future. Even though the odds are stacked in your favour, the consequences of being unlucky can be truly catastrophic for you or your family.
How to Start Your Planning
What should we be doing in practice? First step is to sit down with your partner or whomever shares your finances and simply work out the “what ifs.” What would happen if one of us dies? What if I’m made redundant – or if I have an accident and can’t work? Think about the immediate financial consequences as well as the effect on your lifestyle and long term goals. Also, if you have children, consider the impact on them if something were to happen to you or your partner. It’s not just loss of earnings now, but loss of future earnings and future planning opportunities. People often forget to provide against the loss of a non-earning spouse, who may be looking after children full-time – that situation has financial implications too because one may have to pay someone to provide care that had previously been the preserve of the family member.
Having established the need, think about what you have in place already. What life assurance do you both have; will it be sufficient to pay off your debts and mortgage and to provide some measure of compensation against loss of future earnings. Similarly, what protection is there against the other risks we’ve identified? Do remember to take into account what is provided by your employer, but bear in mind that any such cover comes with the job and would disappear if you left employment. Indeed, when applying for a new job, always check what employee benefits are offered.
Different Plans for Different People
There are no absolute right or wrong amounts in terms of protection insurance; it’s absolutely dependent on your individual needs and circumstances. For example, a married man earning £30,000 per year, with three school age children and a mortgage of £90,000 would be likely to need significantly more life cover than a single man with no children living at home with parents (unless of course those parents were dependent upon him!).
Also, it’s not just about insurance. You can provide protection for yourself and your family by making sure as far as possible that you have some money behind you that you or your family could use if needs be. People with savings are far less exposed to the risks of the “unmentionables” than those who don’t. We understand that there’s a cost to insurance and that some types of cover such as redundancy insurance are expensive. Also if you’re not in good health now, life assurance or ill-health insurance can be difficult or impossible to get.
These are all issues and circumstances that you can discuss with your financial adviser whose expertise and experience will help you to ensure that you’re making the suitable decisions for you and all of your nearest and dearest. Don’t just do nothing and rely on providence; after all, we never know what’s round the next corner!
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