What if something happened to me tomorrow?
- 06 April 2021
- 10 mins
Is the Covid-19 pandemic making you worried about how your family would be looked after if the worst happened?
Investing in protection policies can be an important part of a financial plan, yet just over half (53%) of all adults did not hold any protection products, according to the Financial Conduct Authority.
Five simple steps could help provide much needed comfort for your loved ones when you're gone.
What would happen to my family?
It may not have taken the Covid-19 pandemic for you to ask yourself this question, but it may well be keeping you awake much more often during this troubling time.
It’s hard to avoid 3am anxiety strikes when death and illness feature in so many headlines.
The pandemic has highlighted that even in ‘normal’ times, things happen. Outside of the pandemic, analysis by the Office for National Statistics tells us that on average over 10,000 people die in the UK in a typical week in early April (based on 2015-19 figures). That’s 10,000 families each week coping with a bereavement, not to mention those dealing with non-fatal accidents or illness.
Five things you could do now to help with your family's financial future
No amount of financial planning can magic away the grief, shock or pain of such times. However, an awful situation can become even worse if your loved ones face additional problems such as financial insecurity or issues with legal arrangements.
There is plenty you could do to protect against this to help with your family's financial future – even in lockdown.
1. Where there’s a will…
The first step you can take to help protect your loved ones is to make a will.
Obvious perhaps, but over half the adults in the UK don’t have one, according to 2020 figures from Royal London. Even those who do have a will, may find it no longer fit for purpose – perhaps because they’ve become parents, got married or separated, moved in with a new partner, bought property overseas or moved, say, from England to Scotland (or vice versa).
Admittedly, as noted by The Gazette in July 2020, making or changing your will during lockdown could bring complications – mainly because a will must be signed in the presence of two adult witnesses who won’t benefit from it.
Lawyers lobbied the government on this, and it is now legal to witness the signing of wills via video conferencing. The new legislation came into force in September 2020 and will remain in force until the 31st January 2022, or for however long it is necessary.
Expert advice is important – both for witnessing the will and for preparing it.
2. Establish a Power of Attorney
A Power of Attorney (PoA) is another defence against the unexpected. It’s a legal document that lets someone (or more than one person) act on your behalf if you are incapacitated, it can cover:
health and welfare decisions
finance related and property decisions
PoAs suffer from the perception they are only needed for the very old or infirm. But Covid-19 has reminded us that the young, fit and healthy can also be incapacitated by illness (or accident). Without a PoA in place, their families may be unable to perform the simplest finance tasks like accessing their bank account, paying bills or keeping a business running.
Instead, they have to make a court application for a ‘deputy’ (or ‘guardianship’ in Scotland).
It’s a laborious process, often involving extensive paperwork, medical or social services assessments and possible delays of weeks or months. Investing time in the short-term to arrange a PoA can make life easier for your family in the long-term.
Read more: Do you have the power of control?
3. Consider a living will
Another issue that’s come to the fore during the pandemic is the question of what care or level of medical intervention people want. Or don’t want. This is where a ‘living will’ can help you and your family.
It’s an umbrella term for different documents (advance decisions, advance statements, advance directives), telling healthcare providers and family members your preferences for medical treatment and care if you cannot verbally express your desires. Some are legally binding and some are not, so advice is worthwhile.
With living wills and care plans, it’s important to bear in mind that you can’t always get what you want – to quote the Rolling Stones - especially when healthcare services are stretched,.
But a comprehensive living will offers useful clarity to loved ones, easing difficult decisions about your medical treatment.
4. Protect yourself
UK government figures pre-pandemic showed that in the 2019, around 1.4 million working age people had a sickness absence lasting four weeks or longer; over 100,000 of them didn’t return to work at all.
Protection insurance is an umbrella term used to describe insurance policies that protect the intangible aspects of your life. Life insurance, income protection and critical illness cover are all types of protection insurance.
These policies are designed to provide you with a lump sum pay out or regular income payments in the unfortunate event of illness, accident or death. The payments tend to be tax-free and could provide much needed financial support through difficult times.
Even if you have made the investment of purchasing life, critical illness and income protection insurance in place, it’s worth putting them under the microscope:
Does your protection cater for the real costs of childcare and education?
Was it based on additional job-related benefits that you no longer have?
Are you over-focusing on life assurance at the expense of other scenarios such as long-term illness?
However, research that commissioned by Schroders Personal Wealth in February 2021 discovered that only 28% of UK adults currently have some form of personal protection insurance. The top reason for not purchasing was that it’s expensive with 34% of those questioned citing this as the main barrier.
Good advice and a financial plan could help you protect what matters most.
Read more: Are your protection policies up to scratch?
These protection policies have no cash-in value at any time. If you don't pay your premiums on time your cover will stop, your benefits will end, and you'll get nothing back. If the benefit amount has not been paid out by the end of the selected term, the policy will end and you'll get nothing back.
5. Review your pension
Our fifth action point is to check (and maybe update) who should benefit from your pension if you die before reaching 75 years of age.
Your pension savings do not form part of your estate and are therefore not covered by your will. Instead, you tell the schemes trustees (or ‘nominate’) who your beneficiaries will be. While your current scheme may reflect your present circumstances, what about earlier ones?
Can you remember the beneficiary arrangements you made for a plan you joined a couple of decades back?
Your choices will depend on the type of pension and whether you have taken any money from it.
Pensions are a long-term investment. The retirement benefits you receive from your pension plan depend on a number of factors including the value of your plan when you decide to take your benefits, which isn’t guaranteed, and can go down as well as up. The benefits of your plan could fall below the amount(s) paid in.
Do you require a professional financial planner?
With most of the issues around protecting your family, the Covid-19 pandemic hasn’t changed anything, apart from, perhaps, people witnessing legal documents in parks and gardens. But it may have – usefully – nudged us into having conversations we have long deferred and thinking about financial planning and wealth management.
These are never going to be easy topics, but a good financial adviser can help – putting everything in context, addressing issues like protection and inheritance planning, and tailoring everything to your own family situations.
They may not be able to protect you from grief or loss, but they can offer you some control over the future. This in turn could put to bed some of those 3am anxieties.
Any views expressed are our in-house views as at the time of publishing.
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In preparing this article we may have used third party sources which we believe to be true and accurate as at the date of writing. However, we can give no assurances or warranty regarding the accuracy, currency or applicability of any of the content in relation to specific situations and particular circumstances.
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