Protection is one of those areas of financial planning that often gets set up and then forgotten about.
Many people arrange life insurance or critical illness cover when they buy a home, get married, have children, or take on other financial commitments. The policy goes into place, the direct debit leaves the account each month, and years pass without much thought being given to whether the cover is still appropriate.
The challenge is that life rarely stands still. Children grow up. Mortgages reduce. Savings increase. Careers progress. Retirement gets closer.
Which raises a perfectly reasonable question: Do I still need the protection I originally put in place?
What are life insurance and critical illness cover actually for?
Although they’re often discussed together, they do very different jobs.
- Life insurance typically pays out a lump sum if you die during the policy term. It’s often used to help repay debts, support dependants, or replace lost income.
- Critical illness cover pays out if you’re diagnosed with one of a specified list of serious illnesses covered by the policy. The aim is usually to provide financial support during a period when you may be unable to work or facing additional costs.
The Association of British Insurers provides a useful overview of how both types of cover work and the protections available to policyholders.
When protection is often most important
Protection is typically most valuable when other people rely on you financially.
That might include:
- A partner who depends on your income
- Young children
- A large mortgage
- Significant financial commitments
- A business that depends heavily on you
- Limited savings or emergency funds
In these situations, the financial consequences of death or serious illness can extend far beyond medical concerns alone.
Protection can help provide financial breathing room at what is often an already difficult time.
Why it’s worth reviewing periodically
One of the biggest mistakes we see is assuming that because cover was right ten years ago, it’s automatically right today.
In reality, financial circumstances can change dramatically.
You may have:
- Paid down a substantial part of your mortgage
- Built significant savings and investments
- Accumulated pension wealth
- Seen children become financially independent
- Changed jobs and gained employer benefits
- Moved closer to retirement
Equally, some people discover the opposite. A larger mortgage, growing family, or increased lifestyle costs may mean the cover they arranged years ago is no longer sufficient.
Does everyone need it?
No. And this is where the conversation becomes more nuanced.
There isn’t a universal amount of cover that everyone should have, and there are circumstances where people may decide they need less protection than they once did.
For example, someone approaching retirement with no mortgage, substantial assets, and financially independent children may have very different protection needs to a family with young children and a large mortgage.
The question is usually less about whether protection is inherently good or bad, and more about what financial impact would be created if something happened tomorrow.
If the people you care about would remain financially secure without the cover, that may influence the decisions you make.
If there would be a significant financial shortfall, protection may still play an important role.
What about critical illness cover?
Critical illness cover can sometimes be harder for people to assess because the risk feels less tangible.
Many people naturally focus on what happens if they die. Fewer spend time considering what happens if they survive a serious illness but are unable to work for a prolonged period.
The Financial Conduct Authority recognises that protection products exist to help consumers manage the financial impact of unexpected life events that could otherwise affect long-term financial security.
For some households, the financial impact of serious illness can be just as significant as the loss of a life.
That’s one of the reasons it’s important to consider life insurance and critical illness cover separately rather than assuming they solve the same problem.
So how do you know if your cover is still right?
Usually, it comes back to a few key questions:
- Who relies on me financially?
- What debts or commitments would remain if something happened?
- What assets and savings do we already have?
- How much income would need replacing?
- What benefits does my employer provide?
- What would happen financially if I could not work for an extended period?
The answers often look very different at 55 than they did at 35.
That’s why reviewing protection periodically can be just as important as arranging it in the first place.
Porta’s Take
Protection is one of the least exciting areas of financial planning because most people hope they’ll never need it.
But that’s also why it can be easy to ignore.
In our experience, the question is rarely whether life insurance or critical illness cover is ‘worth it’. The more useful question is whether the cover you have still reflects the life you’re living today.
Financial plans evolve. Families evolve. Responsibilities evolve. What made perfect sense ten years ago may no longer be appropriate now. Equally, what felt like enough cover years ago may no longer provide the protection you intended.
A simple review every few years can often provide valuable reassurance that the right safety nets are still in place for the people who matter most.
If you’d like to review your existing protection arrangements, we’re always happy to help.
Important information
This article provides general information only and does not constitute personal financial advice. The information is based on our understanding of current regulations, which may change in future. Decisions about your finances should always be made based on your individual circumstances. If you’re unsure about the suitability of any course of action, you should seek regulated financial advice. The Financial Conduct Authority does not regulate tax planning, estate planning, trusts or wills.
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