Taking out a new mortgage deal could represent a shift in your financial commitments. So, reviewing whether your financial protection is still appropriate could ensure you have a vital safety net should you face a shock.
Read on to learn how financial protection can provide security in unexpected situations, and what to consider when taking out new cover.
Financial protection paid out a record £8 billion in 2024
Financial protection could provide a much-needed cash injection when you or your loved one experiences a financial shock.
Indeed, in 2024, insurers paid out a record £8 billion in financial protection claims, according to data released in July 2025 by the Association of British Insurers (ABI).
There are several types of financial protection that you might want to weigh up as a homeowner. The three main options are:
1. Income protection
If you’re unable to work due to an illness or accident, income protection would pay you a regular income until you return to work, retire, or the term ends. This income is usually a portion of your salary, such as 60%.
Income protection could help you cover financial commitments, including mortgage repayments, if your regular income stops. The ABI figures show the average amount paid through income protection was £25,133.
2. Critical illness cover
If you’re diagnosed with a covered critical illness, this form of financial protection would pay you a lump sum. According to the ABI statistics, the average amount claimed was £68,735.
You can use the lump sum however you wish. So, you might use it to cover your regular outgoings while you take time off work, adapt your home if necessary, or pay off your mortgage.
3. Life insurance
Life insurance would pay out a lump sum to your beneficiaries if you passed away during the term. It could provide your loved ones with financial security while they are grieving.
You can choose the level of cover to suit you and your family. For example, you might opt for an amount that would pay off your mortgage to reduce your family’s financial commitments.
The ABI figures show 96.5% of life insurance claims were upheld in 2024, and the average claim was for £79,703.
Your circumstances will affect the type of financial protection that’s right for you
If you’ve taken out a new mortgage, review your current financial commitments and consider when and how financial protection could benefit you.
For example, if you’re a homeowner with limited savings, income protection could be a valuable option.
According to a May 2025 article in Cover Magazine, 14% of mortgage holders would immediately struggle to pay their mortgage after income loss. As a result, they could be at risk of losing their home if they haven’t taken other steps to create an income stream.
Alternatively, if you have a family that relies on your income, life insurance may be a priority to protect your loved ones.
In July 2025, a Which? article noted that more than half of people in the UK don’t have life insurance in place, potentially leaving households at risk of financial hardship if they were to die unexpectedly.
Depending on your needs, you might find that you’d benefit from taking out more than one type of financial protection.
3 other factors that might affect which financial protection is right for you
Before you take out new financial protection, check these three areas. They could affect the type and level of cover that’s right for you.
1. Review existing cover
Take some time to review what cover you already have in place.
Even if you haven’t taken out financial protection directly, you could still have some cover. For instance, if your employer provides a death in service benefit, you might not need to take out life insurance as well.
2. Check your employer’s sick pay policy
In 2025/26, Statutory Sick Pay is just £118.75 a week and is paid for up to 28 weeks. As a result, most families would struggle if they relied on this alone, making income protection an attractive option.
However, many workplaces offer an enhanced sick pay policy, so it’s worth reading your contract or employee handbook. Check what portion of your salary you’d receive if you were unable to work and how long it would be paid for.
You could select income protection to complement your sick pay. For instance, if you’d receive a salary for six months, you could select income protection with a six-month deferment to reduce premiums.
3. Assess your other assets
Look at your wider finances when assessing financial protection – what assets could you use if you faced a financial shock?
If you have a substantial emergency fund, you may reduce the level of cover. However, if your assets are earmarked for other purposes, like retirement, you might want to consider the effect depleting them now could have on your future financial security.
We can help you create a reliable financial safety net
As part of your long-term plan, we can work with you to create a safety net you and your loved ones can rely on, including taking out appropriate financial protection. Please contact us to arrange a meeting.
Please note:
This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.
Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.
Note that life insurance and 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.
Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.