Planning

Why is protection important

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See what it takes financially to prepare for emergencies

There's no question that most of us want to protect the things that are important to us - our families, our homes, our quality of life. And how well they're protected largely depends on how much money we have available in an emergency.

Insurance is one of the easiest and most common ways to protect your assets.

For example, if you or your partner were to die or suffer a serious illness, you might have three sources of money:

  • accessible savings from your instant access accounts
  • long term savings you could access in the case of an emergency. However care needs to be taken with penalties for withdrawing investments or fixed term accounts
  • insurance payouts from policies you'd taken out in case of the event

Knowing you have these financial plans in place means you can get on with your life with peace of mind.

Accessible savings

Though you often get a better interest rate by locking away part of your savings, it's wise to keep something accessible. A good buffer is 3-6 months' wages.

You'd generally keep this in an instant access savings account, so you could transfer it to your current account whenever necessary.

Long term savings and investments

Many of us put a great deal of our excess money into a pension fund. This is a sensible, tax-efficient way to save for retirement, but it does mean your money may not be accessible until you take your retirement funds. (You cannot normally access your retirement funds until you reach the age of 55).

The value of any tax benefits depends on your individual circumstances. Tax rules may change in the future.

Life insurance and other protection

Insurance is one of the most comprehensive and common ways to protect your assets. It's also very flexible. You could choose to provide a lump sum in the event of your death, or provide an income if you became ill.

  • Fixed term life insurance pays a sum to your family if you die within a fixed term. For example, you might choose to insure yourself until your children are grown up.
  • Whole of life assurance pays out a sum on your death, no matter when that is. Because it is certain to pay out at some point, you'll generally get a much lower sum assured for the same premium than you would with fixed term insurance. (Only available through our HSBC Premier Financial Service, criteria applies).
  • Serious or critical illness cover insures you against a range of illnesses and injuries. It's very important to check what is covered by the particular policy - for example, it may include some cancers, but not others.
  • Income protection insurance pays you part of your income if you can't work. It usually pays out for almost any injury or illness, but not if you lose your job.

With all types of insurance, it's very important to know exactly what is and isn't covered. Of course, the more cover, the higher your premiums will generally be.

The value of investments (and any income received from them) can fall as well as rise and you may not get back what you invested. For some investments this can also happen as a result of exchange rate fluctuations as shares and funds may have an exposure to overseas markets.

Most investments should be considered as a medium to long-term commitment, meaning you should be prepared to hold them for at least five years.

The value of any tax benefits described depends on your individual circumstances. Tax rules may change in the future.

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Everyone's circumstances are different and what applies to one person may not be right for someone else. The suggestions above are based on a general assumption of each circumstance and they are not intended to provide advice or recommendation.