Why protection is so crucial at every stage of life

A trapeze artist spends their life practising every day so they can hone their skills and perform amazing, potentially dangerous feats. Yet, no matter how experienced they may be, they typically have a safety net underneath them because they recognise that something could always go wrong.

Protection and financial planning work in a similar way. While you might have a strong financial plan that you follow carefully, unexpected events could always disrupt your plans and make it more difficult to meet your goals.

Fortunately, protection acts as a safety net against the unexpected, meaning you can still work towards your goals, even when life throws you a curveball.

Unfortunately, many people underestimate the value of protection, especially younger people. For example, according to IFA Magazine, 48% of people aged 18 to 40 do not have life insurance.

Of those people, 29% said they couldn’t afford protection at all, while 20% said it was too expensive during the cost of living crisis.

Younger people may also feel that they don’t necessarily need protection because they are less likely to face serious health problems. However, this is not the case and protection offers an important safety net throughout your life.

Read on to learn why protection is so crucial at every stage of life.

Your family could struggle financially if you pass away unexpectedly at any age

While you might be less likely to suffer age-related illnesses, there is always a chance you could be diagnosed with a life-threatening health condition when you are young.

For instance, according to Cancer Research UK, there were nearly 2,400 new cancer cases among young people in the UK each year between 2016 and 2018. That’s more than six new diagnoses each day.

Additionally, you may need to consider the potential for accidents. For instance, road safety charity Brake reports that an average of five people die on UK roads every day.

If you die unexpectedly and don’t have protection, you could leave your family in a very difficult position. Without your income, they might struggle to pay the mortgage and other important bills. It could also be difficult to maintain their current lifestyle and they might be unable to contribute to their retirement savings too.

Consequently, this means they could struggle financially in the short term and may find it more difficult to reach their long-term goals.

Your financial responsibilities may increase in your 30s and 40s

An illness or injury that leaves you unable to work could seriously disrupt your finances. If your earnings fall considerably, you may struggle to meet your financial obligations and potentially risk falling into arrears with your mortgage and other bills.

In some cases, this could even mean losing your home if you are unable to afford your rent or mortgage repayments. Even if the situation is not that extreme, missed payments could remain on your credit file and affect your ability to borrow in the future.

A drop in your income could also mean that you are no longer able to maintain your current lifestyle and have to make sacrifices.

This could be especially problematic in your 30s and 40s as your financial obligations may well increase during these decades. For example, in 2023, Finder reported that the average age of a first-time buyer in the UK was 34.

The World Population Review also revealed that the mean average age at which people have their first child in the UK in 2024 is 30.6.

So, failing to purchase protection when you are young could leave you unable to manage your outgoings at a time when you have significant financial responsibilities.

Unfortunately, people in this age bracket are known as the “squeezed middle” as they are most likely to fall short on protection, despite often having the biggest financial obligations.

Your 50s and 60s are vital retirement saving years

In your 50s and 60s, you may have paid off more of your mortgage and your children might have moved out. As a result, your outgoings may be lower.

However, if you are diagnosed with a serious illness and can’t work, you may be faced with additional expenses such as paying for a carer or making accessibility adjustments to your home, for example.

It could also affect your ability to meet financial goals such as paying off the rest of your mortgage, supporting family members, or saving for your retirement.

Just as importantly, if you are out of work and can’t afford pension contributions, even for a short period, you could miss out on a significant amount of money in your retirement pot.

For example, figures from Royal London consider somebody earning £35,000 a year, making a 5% employer-matched pension contribution. They reveal that if this individual stopped their contributions, they would miss out on £4,092 a year in pension savings due to missed employer contributions and tax relief.

Additionally, the wealth in your pension is invested, so these contributions may grow over time. This could mean that your retirement pot is significantly smaller due to missed contributions when you take this potential growth into account.

In your 50s and 60s, when you are closer to retirement, you may have less time to make up for missed contributions by increasing your payments later.

The effects of this could be equally damaging earlier in life too. Making contributions when you are younger means that your wealth is invested for longer. As a result, you may miss out on more potential growth if you stop your payments in your 30s and 40s.

Consequently, stopping your pension contributions at any age could mean that you have a smaller retirement pot to draw on later and have to make sacrifices to your dream retirement lifestyle.

The right protection could look after your family and support your financial plan at every stage of life

If you die or fall ill unexpectedly, your family could be vulnerable and may face financial hardship.

Fortunately, if you have the right protection in place such as life insurance, a payout could help your loved ones cover all their normal expenses and contribute to savings. As a result, your family can maintain financial stability now, and in the future, if the worst happens.

Also, life insurance premiums tend to be much lower when you are young and in good health. So, the earlier you invest in protection, the more affordable it will likely be.

Additionally, protection could help if a significant reduction in your income makes it difficult to cover your general expenses and contribute to retirement savings.

For example, if you have income protection, you receive a regular income while you are unable to work. This could last until you return to work or retire, meaning you might be able to pay your living costs and continue making pension contributions as normal.

You may also benefit from having critical illness cover if you are unable to work for an extended period. This pays a lump sum if you are diagnosed with a serious illness listed on the policy, which you could use to pay off your mortgage, cover living expenses, pay for specialist care needs, or contribute to your retirement savings.

Ultimately, by investing in protection now, you can prevent an illness or injury from derailing your financial plan so you can achieve your goals now and in the future.

Get in touch

Our dedicated protection desk is here to support you with all your protection needs.

Email hello@fcadvice.co.uk or call 0330 057 0960 to find out more.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.

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