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Getting your money under control: Step 3 Protecting your family’s finances

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By Dan Atkinson

Dan is a multi-award winning paraplanner at EQ Investors (EQ) and Fellow of the Personal Finance Society. At EQ, we'll work with you to make sure that your finances support your life choices. To help as many people as possible we put together guides and tools which are free to access on our website

Published on 27/12/2018

There is a saying ‘plan to fail; fail to plan’. When we make plans for the future we have to make assumptions. Our plans assume that things will go well. However, it’s important to remember that sometimes bad things happen to good people. In this blog we will take a quick at some of these things and the ways in which we can prepare for the potential consequences on our finances.

The unexpected hiccups of life

For some things (e.g. fridge stopping working or us losing our job) we can protect our family by building up an emergency fund. For most people a pot of money able to cover 3-6 months is a good target. If you are struggling to do this you aren’t alone, but it doesn’t mean you shouldn’t try. Understanding where your money goes will enable you to take control. Have a read of my previous article to find out more.

The other things I’ll talk about here happen less often but can have a big impact on our family’s finances. These things are harder to prepare for so often the best solution is to take out insurance.

Long term illness of disability

Earlier in 2018, dad’s from The DadsNet bared all to highlight Men’s mental health problems – 1 in 4 of us are affected by this and 1 in 8 men in the UK are diagnosed with a mental health illness. Research has shown that it’s the biggest cause of long-term absence from the workplace – and it’s a growing problem. It’s not the only reason that you might be unable to work – stress, physical injury and ‘acute’ (short term) medical conditions might also affect you.

Statutory Sick Pay (SSP) in the UK is currently £92.05 a week (2018) and employers have to pay this for up to 28 weeks. If you are still off sick after that you may need to claim Employment and Support Allowance (ESA) and this might pay c£70-c£100 a week.

This might not be enough to support your family, and if you’re self-employed you won’t be entitled to SSP. Many employers are more generous than this and you should check what support they provide. However, you might need to put other plans in place to protect your family. This might include your emergency fund and savings, but many people choose to take out Income Protection Insurance as well.

Income Protection Insurance is designed to pay out a pre-agreed tax-free amount each month if you are unable to work due to illness or injury. This is designed to cover long term conditions and you will agree at outset a waiting period before it starts to pay out. Most insurers will also help you transition back into the workplace when you are ready.

Critical Illness

These are usually long term and very serious conditions. Things like a stroke, cancer, multiple sclerosis, or a heart attack. In the UK most treatments are covered by the NHS, but this could still be an exceptionally stressful time. Sometimes you might also need to make adaptations to your home or consider funding treatment outside of the NHS.

Thankfully these things are relatively rare, but worrying research indicates that 1 in 2 people in the UK born after 1960 will be diagnosed with some form of cancer during their life. We ought to put a plan in place to deal with the potential financial consequences.

Critical Illness insurance provides a tax free lump sum if you are diagnosed with a condition listed on your policy. You could use this money to pay off your mortgage so that you don’t need to worry about keeping up with these payments. Some people take this cover out so that they have a lump sum to pay for private treatment.


Setting aside the emotional burdens that this would bring, death of either parent would have a big financial impact. Most people understand that there would be an impact due to a loss of earned income. I love Al’s Stay at Home Dad job description.When we are looking at protecting our family finances we need to consider the cost of running the home and how much replacement childcare might cost. We joke about it but stay at home parents (full or part time) are incredibly valuable.

Life Insurance provides a tax-free payment if the person covered dies during the term of the policy. This money could be used to pay off debt (such as a mortgage) or provide a financial buffer whilst you adapt family life.

Taking action

There are lots of things to consider as you seek to protect your family’s financial well-being. It’s important to ensure that you’re getting the appropriate cover at the right price.

We’ve recently published a free guide which explains the major types of protection insurance, and offers a step-by- step guide on how to buy them. I hope you have a very happy and healthy Christmas!

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