- Financial education
- 5 minute read
Here, we explore the importance of financial protection, why you should discuss it with your employees and what forms of financial protection you should highlight.
Employees need help in this area, and companies who adopt a duty of care are the ones who will retain the best and brightest. Employee wellness programmes are more than relaxation rooms and flexible working hours. They need to put practical measures in place to help employees protect what they have, offering people invaluable peace of mind.
So why exactly is financial protection so critical? Why should business leaders discuss the importance of financial protection with their employees and how can they open up that dialogue?
Why discuss financial protection with employees?
How much do you think your employees understand about financial protection? After all, they are presumably healthy, dependent people with reliable incomes. In fact, fewer than one in ten (8%) employees have purchased an income protection product as discovered in the 2019 Financial Wellbeing Index. Employees may feel entirely confident that they are able to provide for themselves and their loved ones — but have they taken into account the many ways that life can change when they least expect it? Sometimes, life delivers a setback and at times like these, the last thing your employees need is the added burden of financial worry.
Financial protection might sound like an obvious and wise life choice — but why is it the responsibility of an organisation to provide employees with guidance? On top of being the right thing to do, financial protection can be used as a tool to:
- Increase morale — When employees are more financially stable and secure, they have a brighter outlook on life. It provides peace of mind, and they are also more likely to feel appreciative of their employer who has helped them along the way
- Boost productivity —Employees with fewer stresses and concerns are better able to focus on their work. The more they focus, the more work gets done and the better the company performs
- Improve employee engagement — When a company goes the extra mile, you're able to connect with members of your workforce in a way that few other businesses do. Developing these relationships will result in more commitment, benefiting you both in the long-term
- Lower absenteeism costs — Stress has a significant impact on our bodies, especially when we experience prolonged and elevated levels of it. Helping your employees discover the importance of financial protection will reduce stress, providing peace of mind, improving health and alleviating your absenteeism costs
- Reduce staff turnover — Your employees are being treated well and provided with invaluable financial education that is helping them achieve their life goals, while giving their family security. Safe in this knowledge, they are likely to remain with you for the long haul
Now we know the ‘why’, let’s take a look at the ‘what’. Below are some of the most important forms of financial protection you should be discussing with your employees this year.
Income Protection Insurance
Income protection insurance protects your employees from loss of income as a result of illness, accident or injury. According to a 2019 FT Financial Adviser article, Millennials are the generation most likely to want income protection — a fact that you should know if you are currently focused on attracting and retaining Gen Y.
Learn more about practical ways to improve financial wellbeing for employees.
Life insurance is hugely important to employees with dependants. This financial protection ensures those who are left behind have enough funds available to live their lives comfortably. Life insurance helps families during trying times and gives them a financial safety net that could make all the difference in keeping or losing a family home.
Despite the peace of mind life insurance affords, according to one source, millions of Brits either don’t have life insurance, or they don’t have enough of it — It’s recommended that cover should equal roughly ten times an employee’s salary. Another source confirms this worrying statistic, claiming 60% of Brits don't have life insurance.
Critical Illness Cover
Critical illness cover offers assurance cover in case of certain serious illness or disability as the result of an injury. This form of financial protection typically pays out a lump sum upon diagnosis of a range of conditions (strokes, heart attacks, cancer, etc). Payouts can be used to pay off debts or mortgage repayments, which employees might not otherwise be able to afford while being out of work.
Despite the fact that 47% of people say their top financial concern is what would happen to their family if the main breadwinner could no longer bring in money, only 14% of Brits have critical illness cover and one in three don’t know how they would cope if they suffered a critical illness. Critical illness cover is something your employees need and want to know about today.
Private Medical Insurance
We’re lucky enough to live in a country with a publicly funded healthcare system, but when we’re really ill and we’re looking for answers and quick treatment, there’s nothing wrong with looking for a way to reduce hospital waiting times. Private medical insurance can offer this, as well as access to increased medical resources and a wider range of specialist treatments.
In fact, access to private medical insurance may lead to employees getting back to work sooner as a result of prompt treatment — a bonus for you as an employer, but also for the employee, who can return to providing a much-needed income for their family.
Will and Estate Planning
Will and estate planning can go a long way in easing the burden on loved ones when we pass on. This type of financial planning can feel a long way off, and some employees might not even like to think about it, which is probably why 54% of UK adults don’t have a will. Furthermore, nearly 5.5 million Brits have no idea how they would go about making a will.
Discussing will and estate planning with your employees might sound difficult, but it’s an important form of financial protection that deserves consideration. We never know when the worst could happen, and having measures in place can ease family stress and disputes.
If you’re having difficulty getting your employees to open up, read more about how to encourage employees to talk about financial wellbeing at work
Financial protection: professional advice
With so many choices and combinations available when it comes to financial protection, things can get complicated and confusing, fast. With this in mind, it’s definitely worth discussing financial protection with a professional who can give tailored guidance to your employees and their unique situation. Financial protection plans need to consider employees, their family goals, their budgets and aspirations. Employees also need to know the ins and outs of each form of financial protection so they are able to make an informed decision. This year, you can make the decision to help your employees discover the importance of financial protection, allowing them to take a breath and rest assured that their financial wellbeing has been considered.
Close Brothers can help lead the way to financial wellness for your employees. Get in touch today to find out more about our financial education services.