THE IMPORTANCE OFPERSONAL PROTECTION

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1 THE IMPORTANCE OFPERSONAL PROTECTION

2 THE IMPORTANCE OF PERSONAL PROTECTION You re reading this leaflet because your Financial Adviser has identified you have a protection need. They ll help you understand what this means and support you in getting the right plan in place. This leaflet highlights just how important protection is and why you should seriously think about it for yourself and family. I know you might think you don t need protection, you might be saying it ll never happen to me, I can rely on the state to support me or family will help out. You have to ask yourself are these really the best solutions if something happened to you.

3 WHY YOU NEED PERSONAL PROTECTION People are far more likely to insure things they can see and touch, this is why we re good at insuring our cars, mobile phones and pets but not so good at insuring ourselves, our homes and our families. It s human nature to avoid thinking about death or being diagnosed with serious illness but, unfortunately these can and do happen. That s why having insurance in place to help protect you from the financial consequences of these events is so important.

4 The importance of Personal Protection THE MAIN TYPES OF PERSONAL PROTECTION LIFE COVER If you were to die have you ever thought how your family would manage financially without you? In such a scenario life cover could really help ease some of their financial worries. It s designed to pay out a tax free cash lump sum if you die or are diagnosed with a terminal illness during the term of the policy. You can choose to have the cash paid out as a lump sum which could be, for example used to pay off the remaining mortgage enabling your family to stay in the family home. Alternatively you might prefer to have any cash paid out on a monthly income benefit basis. This could help your family meet other monthly commitments such as child care, credit cards payments, car loans and utility bills. WHOLE OF LIFE Pays out a tax free lump sum when you die. Unlike life cover and critical illness cover there is no agreed term, the policy remains in place until you die, regardless of your age, as long as you continue to pay the premiums. One of the main reasons people take out a whole of life policy is to help towards their family s tax bill, particularly inheritance tax. These policies can be written under trust, and in the event of your death the policy will pay out a tax free lump sum that your family can use to pay any tax debt. Trusts and tax planning can be complex so it s always worth considering seeking specialist advice. Having the right life cover in place can help give you peace of mind knowing your family will be financially secure if you re not here to look after them. 2

5 The importance of Personal Protection CRITICAL ILLNESS COVER If you were to become seriously ill, have you thought how this might financially impact you and your family? Could you still afford your lifestyle or continue to stay in the family home? This cover pays out if you re diagnosed with one of the critical illness conditions covered by the policy during the term you want the cover to last. With advances in medical science, more and more people are surviving critical illnesses than ever before, for example cancer survival rates in the UK have doubled in the last 40 years (Cancer Research UK). This is great news but life after a diagnosis can be very different. It could be that you re well enough to return to work, but have to reduce your hours as you re not fit to work as long as before, or might have to attend regular hospital appointments. You may not be well enough to carry out the household tasks or childcare and have to pay someone to help. These scenarios could have huge financial implications on the family budget. Having critical illness cover in place could help ease some of the financial burden and allow you some breathing space to focus on getting better. You may prefer to choose Life with Critical Illness Cover. This pays out if you re diagnosed with one of the critical illness conditions covered by the policy, are diagnosed with a terminal illness or die, whichever happens first during the term of the policy. 3

6 The importance of Personal Protection THE IMPACT OF ILLNESS Being diagnosed with a serious illness can be more common than you think and it can have a devastating financial impact. 5 MINUTES 7 MILLION Every 5 minutes one person suffers a stroke (Source State of the Nation Stroke statistics, January 2017) Today 7 million people fight their daily battles with Cardiovascular Disease (Source bhf.org.uk, August 2017) 4 OUT OF 5 107,800 people with cancer find themselves, on average 570 worse off a month as a result of a cancer diagnosis (Source Macmillan Cancer Support, The Rich Picture People with Cancer report, July 2014) Estimated more than 107,800 people in the UK in 2016 had Multiple Sclerosis (Source MS Society, January 2016) 4

7 The importance of Personal Protection Have you ever stopped to consider how much you spend every month keeping a roof over you and your families head? This covers things like paying your mortgage or rent, council tax, utility bills and food. 53% of UK mortgage holders spend more than 1000 per month on running their home.* Your income pays for this but if something were to happen to you do you have a financial backup plan? Our research shows that 1 in 3 people would have to use their savings to ensure they managed financially if something happened to them.* So having the right level of protection in place can really help fill the financial gap should you lose your income. * Scottish Widows Protect Research

8 IT CAN COST LESS THAN YOU THINK There s a negative perception that protection is too expensive, but not having protection in place could prove to be even more costly. The cost of 100k life cover, for a man aged 32 is 6.07 a month, when you compare this to what you can pay monthly for TV packages, insuring pets and cars or even what you spend on takeaway coffee s, or eating out, it doesn t seem quite so expensive with the average UK household spend on hotels and restaurants being 195 a month (ONS, 2016). WE PAY OUT Another common misconception is that insurance companies don t pay out claims, but data from the Association of British Insurers shows that in 2016 UK insurance companies paid 98% of life cover claims and 92% of critical illness claims. This means they paid out over 4.7 billion in protection claims supporting more than 166,500 individuals and their families when they needed it the most. 6

9 The importance of Personal Protection WHAT OTHER SUPPORT IS THERE? If you don t have protection in place what s your backup plan? Some people might rely on their savings. Think about your own situation, how long would your saving last? Others might turn to family or friends for financial support but could this really be a long term solution? Then there s the State, many people don t know or overestimate how much they d get from the State. It s often less than you think, especially given recent welfare reforms, here are some examples. Benefit Cap this limits the amount a household receives from certain benefits. For a couple living in Greater London with children the cap is per week and outside Greater London it s per week. Support for Mortgage Interest If you re a home owner you may qualify for this benefit. It s paid direct to your lender and helps pay the interest on your mortgage, it doesn t touch the capital. This benefit is changing to become a loan from April So any support you receive will need to be repaid. Bereavement benefits these have recently been reformed and what you could receive depends very much on your circumstances. For example if you have lost your husband or wife and have children under 20 in full time education you could receive a maximum of 9,800 over an 18 month period. However, if you re a co habiting couple you re not eligible to any bereavement benefits. Employment Support Allowance the maximum you could receive is a week, could you and your family live on this? 7

10 Hopefully you ll have found this information useful in helping you understand what personal protection is and the importance it can play in safeguarding your financial future. Your financial adviser will be able to help you choose the right protection plan that meets your needs today but has the flexibility to change and continue to support you as life changes in the future.

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12 Scottish Widows Limited. Registered in England and Wales No Registered office in the United Kingdom at 25 Gresham Street, London EC2V 7HN. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number /17