However much meticulous financial planning you've carried out, there will still be some things you can't predict.
Unexpected costs in the event of a crisis or disruption to your income could not only affect your current finances, but could also have a knock-on effect to your longer-term plans and obligations.
Research by Zurich UK found that 40% of people would have to rely on savings that would last no longer than six months if they lost their income due to sickness or injury.
In more serious cases, others would resort to selling valuables (26%), their car (17%) or even their family home (13%).
While you can't predict falling ill or suffering an injury, you can guard yourself against any financial shocks in case the worst happens.
Choosing a protection policy
To start with, you'll need to work out how much you or you family might need. This could be a case of covering mortgage repayments, living costs, or school or university fees.
It might help to draw up an out-of-work budget to help you pin down how much you might need to get by.
If you are employed, you may be entitled to certain worker benefits, such as life insurance and statutory paid sick leave.
However, if you're self-employed you'll have the responsibility of setting up these protection policies yourself.
Once you have some idea of your requirements, you'll need to start researching the many protection policies on offer.
Critical illness cover
Critical illness cover pays out a lump sum if you are diagnosed with a certain illness, although not all conditions are covered and the policy will also state how serious the condition must be.
Examples of conditions which are usually contained in critical illness cover policies include:
- heart attack
- various types and stages of cancer
- multiple sclerosis
- permanent disabilities as a result of injury or illness.
Life insurance offers financial support to your loved ones if you die unexpectedly.
This is usually paid in the form of a single lump sum, to provide financial security such as ensuring mortgage repayments are met on time.
Life insurance is split into two categories.
Whole of life insurance offers two types of cover - maximum and balanced. With maximum whole of life cover, your premiums are reviewable (usually after 10 years) and likely to increase the older you get. With balanced whole of life cover, as you get older the premiums remain the same.
Term life insurance pays out a lump sum to your beneficiary if you die within the term of your policy (typically 10 to 25 years). However, it will not pay out if you outlive the policy.
According to Zurich, only 8% of people have income protection, despite the risks that loss of income could create.
This type of insurance pays out if you are unable to work due to illness or injury, which is equally beneficial for employees and the self-employed.
Policies can either be short-term (usually between two and five years) or long-term (until you either retire, die or the policy ends - whichever is sooner).
Whichever policies you go for, successful income protection claims pay out a monthly income if you're unable to work up to the age of 65.
Most forms of illness that leave you unable to work are included, depending on how your insurance provider defines inability to work.
Contact us to discuss your protection options.