June 2018 – Impulse Plan

financial protection code for young adults

Here's why you need to be thinking about financial protection NOW

For most young adults, the last thing you want to think about is taking out financial protection policies. You’re probably right, you do not have any dependants and the day of your death is something you imagine will happen in your 80s, 90s if you optimistic about how you are currently living your life. I mean, why spend an extra £100 a month you do not have on an event that could take place decades from now?

What most young adults do not realise is that now is the best time to be thinking about taking financial protection policies. I know, it goes against any sort of “common financial sense” you may have developed at this point, probably because you are thinking that your goal should be in saving for purchasing your first home, buying your first car. These reasons are plausible on their own, but what most young adults do not realise is that whilst it is important to save towards a long term goal, financial protection is just as important as saving in your goal towards these assets. Consider this, if you were to be involved in a car accident which rendered you disabled, you would not be able to work to generate an income. If you had put in place disability cover or income protection cover before this incident, you would assured of still having an income to work towards your savings goal for your first home. Whilst most of us may think that disability may be a bit far-fetched, the people who have been involved in accidents which led to disability or an inability to do their jobs also did not anticipate that this may be a reality.

Financial protection policies should be a crucial point in your investment strategy. Now let us look at some of the reasons why you, as a young adult, are in the best position you will ever be to purchase these policies

01

age is on your side, so are your premiums

You are young, and statistically, you have many more years ahead of you before death. In addition, your youth is normally associated with good health. What this means for insurers is that your life at this point is associated with low risk of imminent death and thus you are considered a lower risk life. This means that your premiums will be as low as they ever will be at this point in your life. If you were older, say 50 years old, your premium would be much higher because your life expectancy is reduced the older you get. There are other factors that may come into play when insurers determine your premium. This is all based on the level of risk attached to you. One of them is age, and if you are young, it has a big impact in reducing your risk and consequently your premium

However, you also need to be aware that there are other personal factors which may have the opposite effect on your level of risk despite your young age such as;

* Smoking :

Smokers are considered to have more risk of death than none smokers, brought on by the negative effects of smoking on your health such as higher risk for heart disease, high blood pressure. Now might be a good time to quit smoking to get lower premiums. You should be aware that some insurance companies require you do not smoke even after you have secured your financial protection policy, particularly life cover, whilst some are only concerned with your smoking status at the moment you take out the policy. These are facts you need to clarify with your financial adviser before you take on a policy.

* Your general health:

You may be young, but if your health is not exactly great, this may be reflected in a higher premium. This is the case with health issues such as diabetes, high blood pressure.

* Your lifestyle:

If you are living life on the fast line or close to the edge, your premium will most likely reflect this. If your lifestyle includes a dangerous job you may find yourself paying a lot more in premiums despite your young age (being a keyboard warrior doesn’t count as a dangerous job FYI, more like aircraft pilots, roofers, iron and steel workers, fishing industry etc). If part of your lifestyle includes extreme sports and hobbies life motor sport, scuba diving or trail running on dangerous terrains, your premium is also likely to be higher than someone who does not partake in these activities at the same age.

02

your love-hate relationship with debt

Whilst you may not have any dependants like children, you may have likely done some studying and perhaps you would have had to fund that on your own or you have taken up student loans. Maybe you have just financed your first car or you have taken up a mortgage for your first house. Debt is probably one of the most difficult things to navigate in your 20s, everyone has some form of debt. The Office of Budget Responsibility has forecast that the face value of student loans alone in 2018/2019 to be £17.4 billion, so really you are not alone in your debt struggles.

With debt, it is important that you put in place measures to ensure that if you become incapacitated due to a severe illness; are unable to do your job or in the worst case scenario die, you are still able to keep up with your monthly instalments as well as cover all your debt in the event of your death. There are multiple products and providers for this, for example, critical illness cover, life cover, disability cover etc. These products have an ability to ease the strain on your financial situation as well as ease the burden on your loved ones should you pass.

how do i get started?

Now that you know that it is important to have financial protection, you next question would be what kind of financial protection do I need? We have a team of dedicated financial advisers that can guide you on what kind of cover you need and how much cover is necessary given your financial circumstances.

As a guide to figuring out what financial protection you would need, take a look at some of our decision trees below. Whilst the decision trees are useful, they only serve as a guide and not financial advice. At least this way you can get an idea of what kind of questions you should be asking when you do see a financial adviser. Impulse Plan offers free consultation meetings as well as a free financial plan which encompasses your ALL your financial needs, including your financial protection needs.

For more information or to book a free meeting with a qualified financial adviser please contact Claire Calder or Tatenda Mushede via email at claire@impulseplan.com or tatenda@impulseplan.com