5 interesting figures that prove financial protection could provide a valuable safety net

Category: News

It’s a common misconception that financial protection doesn’t pay out when you need to make a claim. This belief might put you off using it to create a valuable safety net. Read on to discover some key figures that prove it could be a useful addition to your financial plan.

Financial protection is a term used to cover several different types of insurance that would pay out under certain circumstances, including:

  • Life insurance, which would provide your beneficiaries with a lump sum if you passed away during the term
  • Income protection, which would pay you a regular income if you were too ill or injured to work until you could return to work, retire, or the term ends
  • Critical illness, which would pay out a lump sum to you if you were diagnosed with a covered illness.

As you can see, financial protection could provide you or your loved ones with an essential cash injection when the unexpected happens. The payout may be used how the recipient wishes, from clearing large financial commitments, such as a mortgage, to covering day-to-day expenses.

As a result, you could use financial protection to create a safety net for your family.

If you’ve put off taking out financial protection in the past because you believe you wouldn’t receive a payout if you needed to make a claim, here are five interesting figures that may change your mind.

1. 9% of life insurance claims were paid in 2022

According to statistics collected by Forbes, the vast majority of life insurance claims result in a payout. In 2022, 96.9% of claims were approved.

However, the figures also suggest that just 35% of people have taken out life insurance. So, many families could find they’d be financially vulnerable if there were an unexpected death. It can be difficult to think about how your family would cope if you passed away, but assessing their financial resilience now could potentially help you take steps to ensure their long-term security.

One of the most common reasons life insurance claims are rejected is non-disclosure. It’s important to be honest and clear when you’re taking out any type of financial protection – not providing details about pre-diagnosed conditions or your lifestyle could mean a future claim isn’t upheld.

2. The average life insurance payout in 2022 was more than £73,500

The Forbes data also found that the average amount paid out as a result of a life insurance claim was more than £73,500.

When taking out life insurance, you can choose how much the potential payout will be to suit the needs of your family.

You may choose to link the potential payout to financial commitments. For example, you might want to ensure it’ll provide your loved ones with a way to pay off the mortgage. Or you might want to calculate how it could be used to cover regular expenses to provide stability for your children until they reach adulthood.

If your loved ones might struggle to manage a lump sum, you could also consider family income benefit. Again, your family could claim if you passed away during the term. However, rather than a lump sum, it would provide a regular income to your loved ones for a defined period.

3. The number of people making an income protection claim increased by 9% in 2022

When asked why they haven’t taken out income protection, many people believe that an unexpected event that leaves them unable to work would never happen to them. Yet, it’s impossible to know what’s around the corner.

According to statistics from the Association of British Insurers (ABI), more than 15,900 people made an income protection claim in 2022 – a 9% increase when compared to a year earlier. Of course, the number of people who were affected by an accident or illness but did not have income protection is likely to be much higher.

In total, more than £231 million was paid out to people who were unable to work. The most common claim was for musculoskeletal issues, such as neck and back pain.

4. 9 in 10 people making a critical illness claim were successful

Similarly, the ABI statistics show more than 9 in 10 claims made by holders of critical illness cover received a payout in 2022, with the average person receiving around £66,000.

A critical illness may mean you need to take an extended period off work to recover your health, and a payout could help cover your essential expenses. In some cases, being diagnosed with a critical illness could also affect your lifestyle and the payout could be useful if you need to adapt your home or pay for specialist care.

5. Protection collectively paid more than £6.85 billion to individuals and families in 2022

Finally, proving that financial protection does pay out in many cases, collectively those claiming in 2022 received £6.85 billion. Benefiting from a portion of this money may have helped claimants continue with their lives when the unexpected happens, provide for their families, or allow them to take some time away from work to recover.

Contact us to talk about how to create a financial safety net

Financial protection is just one step you could take to create a financial safety net that provides you with peace of mind. Contact us to discuss how you could improve your financial resilience as part of your wider financial plan, including taking out financial protection if it’s appropriate for you.

Please note:

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

Note that financial protection 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.

What our clients say

I was recommended Paul and Bryony as financial advisers by a friend. My husband and I were particularly interested to think about where to invest our savings. They have helped us to think about what level of risk we are prepared to engage with and explained the different possibilities very clearly and thoroughly, enabling us to maximise the potential of our investments. They also provide regular updates. We have been very pleased with their service and have already recommended them to others.

Dr C Oliver

London

I have been a client of RMI since their foundation. Prior to that, I dealt with the directors for my own personal pension and our business pensions. This relationship as existed for the last 25 years. During this time, I have received first-class support and advice. I have always been kept informed on financial trends and opportunities. To this end I was able to plan retirement early if I wished. More importantly, I was able to choose the right opportunity as when to retire. Since retiring, I continue to receive the highest service and advice on fund management.

Mr. M Moore

Ex General Manager

Leicester

We have dealt with Paul and his staff for over 20 years and have received a first-class service that is completely to our entire satisfaction. We would have no hesitation in recommending the company to anyone who is seeking financial advice.

Mr J Channing

Ex Non-Executive Director, Earl Shilton Building Society

Leicestershire

It’s a great comfort to have Paul Eason and his team on call if I have any queries or concerns about my finances.

Ms M Topham

Oxford

Paul Eason and Bryony Evans have competently managed our investments for the past twelve years. Their service has been managed diligently; they have provided consistency of advice for positive results. This has given us satisfaction and confidence in their ability to handle our personal affairs. Their research and advice are in-depth, concise and clear. They have demonstrated a thoroughness in all aspects of our personal financial planning.

Mr & Mrs S Price

Devon

Following a personal recommendation from a colleague some two years ago, Bryony and Paul provided advice to my wife and myself on planning for my forthcoming retirement. Latterly they have helped another family member on how best to invest a lump sum inheritance. On both occasions, they have guided us through the various options available, indicating the pros and cons in an easily understandable way. They continue to provide regular updates on how the investment is performing. We have always found them to be attentive, knowledgeable and a pleasure to deal with. We would have no hesitation in recommending them to a friend seeking an adviser.

Mr & Mrs P Teasdale

Rutland

When you are investing, you need confidence to make decisive commitments. Paul Eason and Bryony Evans at RMI are true professionals that you can trust implicitly for commercial and personal advice and transactions.

Mr D Matthews

Chairman, Cellular Mouldings Ltd

Northants

RMI not only deal with all our company's employee benefits schemes, but also provide invaluable support for us on a personal level. Nothing is too much trouble and we have found their service to be effective, efficient and friendly. We would recommend RMI to any company or private individual looking for a comprehensive and personal service.

Mr & Mrs I Bates

Ex Directors of The Bright Consultancy Ltd

Bournemouth

Paul and Bryony have advised us for over ten years. They bring strong market knowledge and analysis to provide balanced views for investment decision making. This is then backed up by thorough administration - all delivered in a professional and easy-going manner.

Mr & Mrs I Morton

Concept Shape Ltd

Cheshire

RMI Independent Financial Advisers have been assisting our clients with knowledge and insight into the world of pensions and protection for over 10 years. They have helped many of our company and personal clients navigate their options and meet the legislative duties around pensions and auto-enrolment in the most efficient way, whilst giving them the confidence to plan effectively for their future. We have no hesitation whatsoever in recommending their services to not only our clients, but to other professional connections.

Sunflower Accounts Ltd

Accountants

Wiltshire

Paul has been a trusted adviser to our business for over 20 years and he and Bryony continue to support us with our company pension scheme whilst providing first class financial advice. We would highly recommend RMI for anyone seeking a quality financial advisory service.

Mr J Turner

Managing Director, LINAK UK Ltd

Birmingham

I was looking at my potential retirement options and RMI were able to come up with a bespoke pension solution that enabled me to retire earlier than I had expected.

B Kilfeather

Not knowing how to plan for the future, I required advise about pensions and insurance policies and Paul has helped by being constantly available, calm and pragmatic.

Dr R Singh

Director

Paul was recommended to me by one of his clients and I was looking for a financial adviser who could help with a pension scheme for my employees and also for my personal plan.

Paul helped all the members of my team. He had time and patience and everyone individually with their various circumstances. He was also very helpful with my personal pension during the time I have my business. My personal circumstances have now changed and Paul’s advice has been invaluable.

D Harrison

Business Owner