The Importance of Protection Plans

The Importance of Protection Plans

Posted: 9th July 2024 Key ,

Have you ever wondered how you’d cope financially if an unexpected event turned your life upside down? This very question may have already crossed your mind, prompting you to explore the vast array of insurance policies available. This not only highlights the importance of having a protection plan but also underscores the necessity of finding the right one for your needs, whether for personal use or business.

A protection plan is a type of insurance that offers financial security against unforeseen events like illness, accidents, or even death. For businesses and self-employed individuals, this becomes even more critical, as specialised insurance policies can safeguard their most valuable assets, themselves and their employees.


Protection Plans You May Want to Consider:

Life Cover

Life insurance is a type of policy that pays out a lump sum to your beneficiaries or estate when you die. The money might be used to pay off debts, like a mortgage, or invested to produce an income so your family can maintain their standard of living. The amount paid out by an insurance provider is determined by the level of coverage you choose when you take out the policy.

The most common type of life insurance is called a “Term Assurance” policy because you take it over a set term, perhaps through to the end of your mortgage or through to your expected retirement age.

Instead of a lump sum, you could consider a policy that would pay a regular monthly income to your family for a fixed term. This policy is called a “Family Income Benefit.”

Should the insured person live past the agreed term of either of these two types of policy, the plan simply stops, and you receive no payment. However, premiums can be surprisingly affordable for most people.

Alternatively, a “Whole of Life” insurance policy provides cover for the entire duration of your life rather than a set period. They are often used for Inheritance Tax (IHT) planning, paying an amount into Trust to pay the bill. However, as the insurance company knows they will have to pay out, so long as premiums are maintained throughout your life, it is a more expensive option, particularly if you opt for a set guaranteed premium.

Another option is premiums, which can be set relatively low for an initial period, after which they would be reviewed periodically and are likely to rise significantly as the insured person gets older. An investment element can also be incorporated so that the policy can build up value over time to help with future premium increases. However, if the investment does not grow as much as you expected, you may still end up paying more in premiums to cover the shortfall.

There have been recent trends towards more flexible life insurance policies that cater to the diverse needs of modern families, including hybrid products combining life insurance with investment options.


Private Medical Insurance (PMI)

We are lucky to have the National Health Service (NHS) in the UK, which provides free medical treatment to all residents. While the NHS provides excellent healthcare services, some people may choose to opt for PMI to access faster treatment, more personalised care, or treatments not available on the NHS.

PMI can provide additional benefits such as private hospitals, shorter waiting times, and more choice of doctors and treatments. However, it’s important to note that PMI can be expensive, and not everyone will be eligible for cover. The NHS remains an essential service that provides healthcare to millions of people in the UK, regardless of their ability to pay.

With advancements in medical treatments and technologies, some insurers are expanding the range of illnesses covered and offering additional wellness benefits.


Critical Illness

Serious illnesses can have a severe impact on your finances as you may need to take time off work for your treatment and recovery. In certain cases, it may be beneficial to pay for private treatment, to speed up the process or receive alternative therapies otherwise unavailable through the NHS.

Critical illness cover is a type of insurance policy that pays out a lump sum if you are diagnosed with a critical illness that is covered by the policy, during a fixed term. The cover can be purchased as a standalone policy or as an add-on to a life insurance policy.

Critical illness coverage can vary depending on the policy but typically includes conditions such as cancer, heart attack, stroke, and multiple sclerosis. If you are diagnosed with a covered illness, the policy will pay out a lump sum of money that can be used to cover medical expenses, pay bills, or make necessary lifestyle changes.


Income Protection

Income Protection insurance is designed to provide you with a regular income if you’re unable to work due to illness or injury. It’s an essential policy for anyone who relies on their income to pay bills and support their family.

The payments start after an initial deferred period of your choice. If you are able to return to work prior to the end of this deferred period, no payment is made. Otherwise, it will usually pay until your return to work, retirement, or earlier death. There are also policies that pay out for a shorter set term (e.g. five years), and these are less expensive.

The term of the contract can usually be to age 70, and there is no limit to the number of claims that can be made while the policy is in force.

You should note that these policies are designed to replace some of the lost income caused by accident or sickness – the level of benefit that you choose can be reduced if there is no loss of income e.g. through state benefits, employer benefits and other insurance policies.

There’s a growing trend towards policies that offer partial benefits if the insured can return to work in a reduced capacity.


Business Protection

Embarking on the journey of self-employment or running a small business is both exciting and challenging. As a self-employed individual or small business owner, you or your key employees are the driving force behind your enterprise’s success. Therefore, it is crucial to recognise the significance of protecting yourself, certain employees and the business against unforeseen circumstances that could potentially threaten its continuity. Business Protection Insurance provides a safety net for your company if a key individual, shareholder or partner dies.

There are three main types of cover:

  • Keyperson Insurance: Provides financial protection to a company in the event of the death or critical illness of a key employee. This employee is typically vital to the success and smooth operation of the business, and their absence could cause financial hardship. The policy pays out a predetermined sum of money to the company, which can be used to cover expenses, recruit and train a replacement, or help stabilise the business during a difficult period.


  • Shareholder Protection: Ensures the smooth transfer of business ownership in the event of a shareholder’s death or critical illness. It aims to protect the interests of the remaining shareholders by providing funds to buy the affected shareholder’s shares, allowing for a seamless transition of ownership and preventing potential disputes or financial strain on the company.


  • Business Loan Protection: Safeguards a business against the risk of being unable to repay a loan due to the death or critical illness of a key individual responsible for loan repayments. This insurance ensures that the outstanding loan amount is paid off, relieving the burden on the business and allowing it to continue its operations without financial strain.

New products are emerging that offer more tailored solutions for small businesses, including coverage for mental health-related absences.



In conclusion, a protection plan is an essential investment that can provide financial security and give you peace of mind, knowing that you and your family are financially secure in case of unexpected events.

We can help devise a protection plan to suit all budgets – something is better than nothing. In general, the younger and healthier you are when you apply, the cheaper it will be to arrange, and you can then fix the premium for the long term. Premiums for policies such as Critical Illness or Income Protection will naturally be higher as you are significantly more likely to claim for health than death.

Having a pre-existing condition does not mean that providers will not cover the insured but will more than likely increase the premium and may have more extensive exclusions than for those people who do not have a history of medical issues.

It is also important to review your protection cover periodically, to check that it is competitive, sufficient, and appropriate for your changing circumstances.

Whether you’re an individual, a family, or a business owner, you need to have a protection plan in place to safeguard your financial future. So, don’t put it off any longer, get a protection plan today and secure your future.


Get Protection cover today


Find out more about our Life Insurance and Family Protection services here.


This communication is based on our understanding of the new rules and is for information purposes only and not intended as advice.

Wise Investment are authorised and regulated by the Financial Conduct Authority.  Our FCA number is 230553

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Alex Rae