When things in life go wrong, insurance can come to rescue - Sarah Coles

But in the real world, something nasty will happen to us all in the end, and sometimes insurance is the only solution.

I wouldn’t say I’ve led a particularly disastrous life, but I’ve had to make a pretty impressive number of insurance claims.

My favourite was when burglars broke in through a wall in my house and the insurers were so baffled as to how that was even possible that they sent a loss adjuster round to stare at the rubble.

But the insurance that had a massive impact on my life has been life cover. When my mum died in her early 50s, she asked my sister and I to use the money from her life insurance policy to help us buy a property.

It meant she had the comfort of knowing we had this extra level of security after she’d gone, and it has made the world of difference to both of us in the decades since.

When I had children, their father and I agreed to take out life insurance policies, to give our children the same security if something terrible happened to either of us.

Unfortunately, it was only after he died in his late 40s that I discovered he’d never got round to it.

Insurance makes such a profound difference in difficult times, that when we put together our 5 to Thrive programme at HL, outlining the five steps to build financial resilience, insurance came in at number two.

It means that once you’re on top of expensive short-term debts, your next consideration is protection.

The cover you need depends enormously on your circumstances. Check with your employer whether you already have death-in-service cover, which will pay out a multiple of your salary if you die while you’re still working for them – this is often four times salary.

You’ll need to work out whether this would cover off anything you’re responsible for, and whether you need life cover on top.

My mum’s insurance helped her put something aside for her kids, but in other cases your partner may need it to pay off a mortgage they can’t afford alone, or to provide more income if they’re unable to work for a while.

It’s also popular with older people who want to provide a way for their beneficiaries to pay inheritance tax or cover the cost of the funeral.

You need to decide how much cover you need, and whether you want whole-of-life or term life insurance. Whole-of-life pays out regardless of your age when you die, while term life provides life insurance for a specific amount of time.

Either way, it makes a great deal of sense to write this in trust, so that it passes to the beneficiaries outside of probate, and saves hassle and potential cost when you pass away.

Protecting your family after your death doesn’t begin and end with insurance though. It’s also worth checking your pensions to see what’s in place in the event of your death.

Many of them will pay survivor’s benefits or will pass the pot onto your spouse. If you’re not married, or you want it to be paid elsewhere, you’ll need to complete a ‘nomination of beneficiaries’ form, to highlight who you want to receive the benefits.

You also need to think about the documents you can draw up to protect your family, including a will, and a lasting power of attorney – which allows you to nominate someone to look after your health and your finances if you lose the ability to make decisions for yourself.

Unfortunately, we don’t just need to plan for our death: we also need to consider the fact that we could get too ill to work while we’re still relatively young.

If you’re employed, your first port of call is to check what’s on offer from your employer. Some will cover you for long-term illnesses, and some will provide access to discounted insurance cover, which is often much cheaper than policies you can buy yourself.

However, if you’re self-employed, or your employer doesn’t offer anything, you’ll need to go it alone and consider critical illness cover or income protection.

The former pays a lump sum if you fall critically ill at any point during your life – things like a heart attack or certain types of cancer.

The latter pays out a percentage of your annual salary between when you get ill and your retirement age. Both are incredibly valuable, so in an ideal world we’d all have both.

The fly in the ointment is the cost, particularly of income protection cover.

However, this needs to be weighed against how much it would be worth to you.

What changes would you need to make if you suddenly had to live on disability benefits, and how much difference would it make if you had the insurance payments to top that up?

Planning for the worst, and spending your money on protecting yourself from things that may never happen, may make you feel like you’re wasting your money.

And if you’re very, very lucky, you’ll get to feel that way for the rest of your life.

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Thank you

James Mitchinson