Many people focus solely on investment returns when planning for retirement, but there’s a bigger elephant in the room here, and it’s about protecting your assets & income. I will use Critical Illness Cover (CIC) as the example, as it is one of the most commonly used type of personal insurance in the UK.
In case you have never heard of CIC, it provides a tax-free lump sum payout if you’re diagnosed with a serious medical condition, helping cover expenses, lost income, or lifestyle adjustments so you can focus on recovery without financial worry.
Let’s compare two individuals, James and Sarah, to see how a simple critical illness insurance policy can make all the difference.
James vs. Sarah: The Retirement Strategy That Made the Difference
- Both are 45 years old, planning to retire at 65.
- Each starts with £25,000 in investments, expecting 5% annual returns.
- Both have £500 per month to invest—but Sarah chooses to protect herself, while James ignores protection.
James: Invests All £500, Ignores Protection
- Invests £500 per month, growing his fund to £206,000 by retirement.
- Believes investment returns alone will safeguard his future.
Sarah: Invests £450, Pays £50 for Critical Illness Cover
- Invests £450 per month while paying £50 for critical illness protection.
- Her investments grow to £187,000—only slightly less than James.
What Happens When Life Takes an Unexpected Turn?
At 50, both suffer a serious illness, preventing them from working for 5 years.
James (No Critical Illness Cover)
- Forced to withdraw £30,000 per year from his investments for medical bills, mortgage repayments, and living expenses.
- His retirement savings plummet to £0—leaving him with no savings other than his former workplace pension at 65.
Protection Isn’t an Expense—It’s Peace of Mind
James focused only on investment growth, believing it was enough. But one health crisis wiped out his entire retirement savings. We, unfortunately, hear time and time again of clients who believe “it won’t happen to me”.
Sarah made a small sacrifice (£50 per month)—and it protected her future while barely impacting her overall investment growth.
It’s not just about how much you invest, it’s about ensuring your retirement stays secure, no matter what life throws your way.
Affordable Protection: How Much Does It Cost?
Critical illness cover is far less expensive than most people think, from a small amount each month, you can protect your financial future from an unexpected health crises, and remember the earlier you get insured the cheaper it is.
- Small cost, massive financial security
- Invest wisely AND protect your future
- Don’t let illness derail your retirement plans. Critical illness is far more detrimental than investment performance
Self-Employed?
Many workplaces offer varying levels of personal protection, whether it be via CIC, Income Protection or Death In Service, and it’s worth reviewing these to ensure they actually meet your needs. However, for the self-employed, not having adequate protection is the biggest risk to your financial security. Not to mention there are also tax benefits from paying insurance premiums from your limited company.
Ready to Secure Your Future?
Get in touch with your usual adviser to explore your protection options and safeguard your future. Even if you currently have insurance (perhaps offered by your employer) there is no harm in chatting through your current policies, but there is potentially great harm by ignoring it.
