Protection and insurance advice

What could actually derail things

A financial plan usually assumes you keep earning. Protection is what happens to the plan if you cannot: if you die, if you are seriously ill, or if you are unable to work for a long stretch.

The useful starting question is not which policy to buy. It is what would need paying for, by whom, and for how long, if your income stopped. Once that number exists, the cover follows from it. Without it, cover tends to end up in the wrong places.

The main types, briefly

• Life cover pays a lump sum or an income on death. Level, decreasing or increasing, and often written in trust so it pays out without waiting for probate.
• Income protection replaces part of your earnings if illness or injury stops you working. This is the cover most people are missing and the one that most often gets used.
• Critical illness cover pays a lump sum on diagnosis of a defined condition. The definitions matter enormously and vary between insurers.
• Family income benefit pays a regular income rather than a lump sum, which some families find easier to plan around.
• Private medical insurance, which is about speed and choice of treatment rather than replacing income.

Two details that decide whether cover works

How it is written. Life cover held in trust normally pays out promptly and outside your estate. The same policy not in trust can be delayed by probate and may add to an inheritance tax bill. It costs nothing extra to get this right at outset, and our guide to types of trust explains how the arrangement works.

What you disclosed. Claims fail on non-disclosure far more often than on the small print. Being thorough and slightly boring at application stage is the best protection you have.

If you own a business, cover for the business itself is a separate conversation and sits on our business owners page.