13/06/2025

Financial protection: 3 useful questions to help you calculate appropriate cover

Financial protection may provide you or your loved ones with a financial injection when you need it most. Calculating what level of cover is appropriate for you is an essential step to take when comparing options.

Over the last couple of months, you’ve read about why financial protection is important and the different types that might be useful to you. Now, read on to find out how three questions could help you assess the level of cover you’d need to offer peace of mind.

The level of cover refers to how much you or your family would receive should you need to make a claim. Usually, you can select a level of cover that suits you and your circumstances.

So, what questions might be useful to answer?

1. What are your outgoings?

When certain circumstances are met, financial protection can provide either a regular income or a lump sum. To calculate the level of cover you need, you may want to start by reviewing your regular expenses – what are your essential household bills?

Knowing your monthly expenditure is useful when you’re taking out income protection or family income benefit, which would provide a regular income.

Life insurance and critical illness cover would pay out a lump sum. As a result, you might need to consider how long you or your family would potentially need to rely on the payout when assessing the level of cover you’d need to provide long-term security.

2. What existing cover do you have?

Before you start looking at your options for financial protection, take some time to review your existing cover.

If you have previously taken out financial protection, check if you’re still covered, in what circumstances it would pay out, and what the level of cover is.

You might also benefit from financial protection you haven’t personally taken out. For example, some companies, like banks, may offer life insurance or another form of financial protection when you open an account with them.

In addition, your employer may provide benefits that are similar to financial protection, such as:

• Enhanced sick pay: Statutory Sick Pay would leave most families struggling to meet essential outgoings. However, your employer might offer enhanced sick pay, which could help you bridge the gap. Be sure to check what portion of your salary your employer would pay if you were unable to work and for how long.
• Death in service: Some firms may also offer a death in service benefit, which would provide your family with a lump sum if you passed away while employed at the company. This is usually a multiple of your salary, so it’s important to review what your loved ones may receive and if there are any restrictions.

Understanding the protection you already have in place could ensure you’re able to pick options that complement these and potentially lower your premiums. For instance, if your employer would provide sick pay for six months, you might take out income protection that has a longer deferment period to reflect this, which could reduce the cost of cover.

3. What other assets do you have that might support you?

As part of your financial plan, you might have taken other steps to help you or your family overcome a financial shock, like creating an emergency fund. So, considering your wider financial circumstances when assessing if financial protection could be right for you is often valuable.

Financial protection can bridge the gap between your income and your expenses

With this information, you can start to assess what level of cover is right for you.

If you’re considering income protection, you can calculate the potential gap between your essential expenses and expected income if you were unable to work. You can then select cover that would bridge this gap and allow your family to maintain their current lifestyle.

Similarly, if you want to take out life insurance to ensure your loved ones would be financially secure if you pass away, you may multiply the outgoings to calculate the lump sum they’d need to meet expenses for a certain number of years.

Get in touch to talk about your financial protection

If you’d like to discuss taking out financial protection or want to review your existing cover, please get in touch. By reviewing financial protection alongside your wider financial plan, you could understand which option may be right for you.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. 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.