There are many reasons that people do not seek out financial protection, some do not fully understand its purpose, whilst others may not be aware of it at all. In this article we look at the common misconceptions when it comes to financial protection and aim to provide clarity on its importance and how it is relevant to you, and should be an integral part of your financial planning.

Myth 1: Insurance Companies Don’t Pay Out

It is a common misconception that if and when you do come to make an insurance claim, insurers won’t pay out anyway. This results in many people making a greater risk by not taking out and financial protection, when they could benefit from it. Data shows that this is not true, according to the Association of British Insurers, the majority of claims made are in fact paid. In 2021, insurers paid 97% of life insurance claims, 91% of critical illness cover claims, and 86% of income protection claims. In 2021 the total payout by the insurance industry was £18.6 million every day. A common reason for claims not being paid was due to non-disclosure issues, which is why it is important to be honest and thorough when taking out insurance of any kind.

Myth 2: You Can’t Get Insurance With a Pre-Existing Condition

If you have a pre-existing condition, it doesn’t mean you can’t take out financial protection at all. Yes, it can mean the process is a little more complex, however appropriate protection can still add value and offer invaluable peace of mind. In some cases, insurers may provide you with cover that will exclude pre-existing conditions, or in some cases there may be more specialist providers available who offer more comprehensive cover. Please make sure you disclose as much information as possible, be thorough and open about your condition, so as not to create issues should you need to claim.

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Myth 3: There Is No Benefit For Me

It can be difficult to consider a time where financial protection could be useful, the circumstances which would lead to that can seem unfathomable. However, it is important to think about whether you would struggle if your income stopped due to unforeseen circumstances, or whether your family would face financial hardship if you passed away. Financial protection provides vital security for the unseen parts of life that may or may not happen and we cannot plan for. None of us can know what lies in the future, planning for every eventuality can offer comfort in some truly difficult times, not only for you but those around you who could be directly affected.

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Myth 4: Insurance Is Too Expensive

Financial protection does not have to be expensive, it can actually be a lot cheaper than you think. According to a report in Professional Adviser, 31% of people say the cost of protection policies are too expensive for them to consider taking one out. However, (depending on your circumstances), it can actually be a lot less than you think. The security that having one of these policies can provide means that it adds a lot more value and peace of mind. 

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Myth 5: Insurance Is Too Complicated To Set Up

Researching and looking into insurance providers can feel like a daunting task. Whilst we appreciate there are many providers to consider and the amount of information you will be required to give can be time consuming, it does not have to be an overly complicated process. We are here to help you find the right provider for you, and time put in can mean so much more with the potential reassurance a policy can provide, long term.

Considering financial protection should be part of a wider plan to organise and protect your finances now and into the future. This will allow you to consider how the financial protection will support your financial goals and objectives, whilst also complimenting any other financial steps you may be taking. On the whole, having this protection in place gives an added sense of security and peace of mind for you and your wider family.

If any of the above has sparked any questions or you are interested in finding out more about financial protection, please don’t hesitate to get in touch with us at hello@claruswealth.co.uk 

Articles on this website are offered only for general informational and educational purposes. They are not offered as and do not constitute financial advice. You should not act or rely on any information contained in this website without first seeking advice from a professional. Past performance is not a guide to future performance and may not be repeated. Capital is at risk; investments and the income from them can fall as well as rise. Clarus Wealth Ltd is an appointed representative of Best Practice IFA Group Ltd which is authorised and regulated by the Financial Conduct Authority. Clarus Wealth Ltd is entered on the Financial Services Register (http://www.fsa.gov.uk/register/) under reference 581586. The guidance and information contained within this website is subject to the UK regulatory regime, and is therefore targeted at consumers based in the UK. The Financial Ombudsman Service is available to sort out individual complaints that clients and financial services businesses aren’t able to resolve themselves. To contact the Financial Ombudsman Service, please visit www.financial-ombudsman.org.uk.