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Choosing the right financial protection when you take out a mortgage could boost your mental health

by RPG Chartered Financial Planners

When you think about the benefits of financial protection while you’re taking out a mortgage, you could be overlooking one of the most valuable aspects – it could support your mental health.

It’s common to review your financial resilience when taking out a mortgage. After all, it may be one of your largest financial commitments. Having a financial safety net to fall back on when the unexpected happens could be invaluable.

Appropriate financial protection may pay out if you are diagnosed with a critical illness or couldn’t work due to an accident. So, you may be able to continue meeting financial commitments while you focus on your recovery. 

Yet, it’s not only physical health that’s important, but your mental health too.

The importance of looking after your mental health is a topic that’s become more openly discussed in recent years. Mental health challenges are something many people will experience in their lifetime.

According to a survey from the Mental Health Foundation, 60% of UK adults said they experienced anxiety that interfered with their daily lives in a two-week period. Furthermore, 30% said they did not cope well with feelings of anxiety. 

Here are two valuable reasons financial protection could boost your mental wellbeing.  

1. Income protection may provide an income if you experience poor mental health

Income protection will pay out a regular income if you’re unable to work, perhaps due to an accident or illness. Usually, the amount paid will be linked to your salary, such as 60% of your normal income. Typically, it will continue to pay out until you return to work, retire, or the term ends.

It means if you’re unable to work you can continue paying for the essentials, such as your mortgage. 

Income protection is often associated with physical health. But some types of income protection could provide support if your mental health suffers too.

There are many ways mental health can affect your life. While you may continue to work when your mental health is poor, at other times, you may need to take time off to focus on your wellbeing. Income protection that covers mental health conditions may allow you to step away from work without financial concerns adding to your worries. 

In fact, statistics from LV= show that 12% of the income protection claims they paid out in 2022 were related to mental health.

Not all types of income protection cover mental health. You should carefully read any paperwork before you decide if protection provides the cover you want. For example, would it cover conditions such as stress or depression? 

2. Financial protection could provide peace of mind 

Even if you don’t need to make a claim, financial protection could still improve your mental wellbeing. 

Knowing that if the unexpected happens you’ve taken steps to ensure your financial security can be a huge weight off your shoulders. 

The Mental Health Foundation study found that 32% of people worry about not being able to afford their bills. Additionally, 40% said financial security would help prevent anxiety. 

As financial protection could provide a cash injection when you need it most, it can improve your financial resilience. So, having appropriate protection in place could ease anxiety and stress day to day.

Choosing financial protection that meets your needs

When taking out financial protection, it’s essential that you choose an option that suits your circumstances.

If you’re taking out a mortgage, your finances may be very different from what they were just a few months ago. So, even if you have existing protection in place, reviewing if it’s still suitable could be worthwhile. 

You may want to consider in what circumstances you’d like protection to pay out and what level of cover you need to be secure.

These questions could help you begin to understand how financial protection may create a safety net:

  • How much are your essential outgoings each month?
  • How long would other assets, like your savings, last if your income stopped?
  • Do you have any other cover, such as protection provided by your employer?
  • What are your priorities? 

If you have a partner or children, you may also want to consider life insurance. This would pay out a lump sum to your family if you passed away during the term. Your family could use the money in a way that suits them, from paying off the mortgage to saving it to pay for your child to go to university in the future.

Life insurance can be difficult to think about. Yet, it could provide your loved ones with financial security when they’re grieving. 

Contact us to discuss financial protection

As a homeowner, the right financial protection for you could improve your long-term security and wellbeing. If you’d like to discuss your options and understand which type of protection could be suitable for you, please get in touch. 

Please note:

This blog is for general information only and does not constitute advice. 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.

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