Insurance/Protection policies are often seen as a way of providing peace of mind for policyholders in uncertain times; nothing is more uncertain than the current COVID-19 pandemic changing the world around us in ways we could never have expected.
It is in these unprecedented times that the spotlight is heavily cast not only on how we effectively manage our assets, but more importantly how we protect them.
While some people may have insurance policies in place for these kinds of scenarios, the vast majority may not have any kind of protection policy in place at all.
Equally, for those people with insurance policies, its likely few have looked at the small print around what is actually covered. This is especially important if you have a portfolio that includes bespoke or non-standard assets such as wine, art, or other collectibles.
Interestingly, since 2014 the figures for the number of people with protection policies have consistently dropped. As of 2019, only 23.7 million protection insurance policies were in place in the UK – 1.5 million fewer than the previous year. It remains to be seen if this trend is reversed as many people found themselves not covered when they needed support during 2020. Understandably, claims payments in 2020 also increased to previously unseen levels.
For those who have existing policies in place, we advise you to review your cover, and check it is still suitable for you and your family’s needs. Look at the terms and conditions to see what you are covered for, even if you are not looking to make a claim in the foreseeable future. Understanding the parameters of your policy’s protection is always important, so you have peace of mind when times get rough.
If you do not have any protection in place (or are looking to amend/upgrade your existing cover), now is the perfect time to consider what needs you have and what you could do to mitigate problems in the future. Insurance providers are currently reviewing their terms and conditions for COVID-19, so it is important to be mindful that any new policies may not cover the current outbreak – with that being said, there is never a bad time to start looking at protecting yourself and your family.
Protecting your estate
Arguably one of the best ways to protect yourself is also to protect your estate, enabling you to leave a lasting legacy for future generations. Without a solid plan in place, your passing may leave beneficiaries with difficulties such as inherence ambiguities or additional tax burdens. But luckily, there are some very easy ways to ensure you are prepared – First and foremost, write a Will!
The pandemic has forced many people to consider their own mortality, as seen by figures for remote Will writing services increasing by 267% in 2020, well above the normal average.
Next, consider a Lasting Power of Attorney – what happens if you lose capacity to make decisions?
Taking reputable financial advice is also suggested for those who have Inheritance Tax (IHT) concerns and larger, more expensive assets. There is a plethora of ways that you can reduce IHT liabilities such as gifting and investing in exempt assets – however, guidance is more often than not required to ensure you stay within the rules and regulations.
Diversifying your Portfolio
The investment principle of diversification is also an important tool which can be used as a means to protect your wealth. As noted by Warren Buffett: ‘Diversification is protection against ignorance’.
Diversification allows you to manage risk and reduce volatility of your overall portfolio. Markets rarely remain static, and it is virtually impossible to find the ‘perfect time’ to invest. While you can reduce risk associated with individual stocks and shares, it is much harder to do so with wider market shocks (as seen with the drop back in March 2020) so the key is to diversify with different asset classes such as equities, fixed income and alternative assets which should each react differently to changes in market conditions.
Ultimately, you are looking to balance risk against returns, to find a space where you are comfortable with your investments and can still achieve sustainable growth.
Working with Morrinson Wealth
By working with Morrinson Wealth in a partnership for life, we’ll give you the peace of mind knowing that we will be there for you every step of the way, looking after your financial journey together. So you will be empowered to do whatever you want, when you want, all whilst knowing that you can continue with the things that keep you busy in life, with someone on your side looking after things in the background.
We’ll do this by understanding the unique results you want, when you want them and how you want to get there. We’ll then aim to grow your investments in a simple and tax-effective way to work towards achieving those goals, and also discuss ways to protect your portfolio and the assets you have accumulated so far on your journey.
Morrinson Wealth is an Appointed Representative of and represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the Group’s wealth management products and services, more details of which are set out on the Group’s website www.sjp.co.uk/products.
Morrinson Wealth is a trading name of Morrinson Wealth Management LLP.