What does financial protection look like for different generations?

Financial protection helps to safeguard you against unforeseen events, but it is not a one-size-fits-all exercise.

A policy designed for a 25-year-old starting out in their career is unlikely to suit you if you’re retired, or balancing career demands and family priorities in your 40s.

As your priorities change, so too will your financial vulnerabilities. Understanding how your needs will evolve over the long term can help you protect your wealth appropriately.

Young adults are prioritising income protection and mental health support

For younger millennials and Gen Z, financial vulnerability typically means becoming too ill to work at a young age. If this were to happen, they may not be able to maintain their lifestyle and save for the future, particularly if they have not yet built up robust savings.

Indeed, research from AJ Bell reveals that whilst 31% of Gen Z say retirement savings are a priority, balancing day-to-day living expenses, short-term travel, and building an emergency fund still takes precedence.

However, according to research reported by Cover Magazine, 37% of Gen Z aged 18 to 29 don’t feel that protection is necessary for those aged 35 and under.

If you’re a young adult, you may not yet own a home or have dependents, but you likely still have ongoing financial obligations or goals, including:

• Staying financially independent
• Saving up for a home
• Keeping up with car payments and everyday living costs
• Having the freedom to live life on your terms
• Building a foundation for your future goals

Here, a sudden loss of income could derail long-term financial plans early on. Indeed, research from the Department for Work and Pensions finds that approximately one in four people who are unable to work due to ill health are under the age of 35.

For this reason, financial protection for young adults typically centres on safeguarding their earning potential rather than leaving a legacy. Alongside a monthly income replacement, young adults also value prevention over a cure, so features that include support for this are valuable. These could include:

• Access to virtual GP services or fast-tracked private consultations
• Mental health support, early intervention therapy, and counselling
• Comprehensive critical illness cover, either standalone or bundled with income protection.

Looking for protection plans that prioritise these could ensure that you receive meaningful support long before you ever need to make a major claim.

Gen X is balancing family dependencies and financial pressure

Gen X, who are now between the ages of 46 and 61, are often dubbed the “sandwich generation”.

If you’re in this generation, you may find yourself supporting your children through rising living costs whilst managing the care of elderly parents. At the same time, the research from AJ Bell shows that retirement planning becomes a significant financial focus at this stage, with 51% of Gen X citing it as a priority.

All in all, you may be under significant financial pressure, with multiple obligations vying for your attention.

However, despite facing so many financial pressures, Gen X is under-protected.

Swiss Re Institute’s global Mortality Resilience Index highlights that only 44% of households have the backup money and assets needed to survive should the primary earner pass away. Think of your own situation – if you’re the breadwinner, would your family remain comfortable if you passed away?

There are several reasons why Gen X might not have the right protection in place:

• Their household income has outgrown the cover they put in place years ago
• Family living expenses have risen across the board
• Many still hold the belief that insurance is a waste of money
• Inflation has eroded the real-terms payout value of protection set up pre-Covid

An outdated policy can leave a gap between your family’s actual outgoings and your financial safety net. You may assume you’re safe because you already have cover in place, but real vulnerability often stems from out-of-date cover rather than a complete lack of it.

What’s more, if you don’t have any protection at all, any unexpected event could cause you to deplete your savings or even go into debt.

Conducting regular reviews of your existing protection can be very helpful. It ensures your cover accurately reflects your current lifestyle and shields your loved ones from unnecessary financial stress should the worst happen.

Read more: When health impacts wealth: How to build financial resilience into your retirement plan

Baby boomers are facing critical life insurance cover and care planning gaps

Whilst AJ Bell’s data shows that older demographics are the most likely to report having “no financial goals”, taking a passive approach to your finances at this stage could leave you vulnerable.

For baby boomers (those born between 1946 and 1964), financial protection becomes more about protecting assets, legacy, and long-term care needs.

If you’re in this age group, you may hold significant wealth in property and pension assets but are still missing an important piece of the puzzle – protection against later-life costs and tax liabilities.

Indeed, protection can be just as vital to an estate plan as a will. After all, long-term care costs and unexpected tax bills could quickly erode your family’s assets.

Essential factors to consider as part of your financial plan could include:

• Writing whole-of-life cover into trust, which could help cover potential Inheritance Tax This means your beneficiaries can handle tax bills without needing to sell family property or assets.
• Building a later-life care plan that ensures funds are available when you need them most. This could mean structuring your assets in such a way as to secure a guaranteed income for potential home care or residential support.
• Establishing a robust will and securing Lasting Powers of Attorney (LPA) so that trusted individuals can handle financial and health decisions on your behalf.

Addressing these areas proactively can help prevent administrative delays and ensure your hard-earned wealth passes to the next generation.

Get in touch to review your protection strategy

Taking out protection is not a static decision to be made once and promptly forgotten.

As your life changes, your financial safety net needs to expand to support you. Whether you’re buying your first home, preparing to transition into retirement, or planning the legacy you intend to leave behind, protection can help keep your goals secure.

We can help you develop a comprehensive plan that protects your earning potential, your wealth, and your family every step of the way.

Talk to us today to review your existing policies or build a plan for the future.

Email us at enquiries@pen-life.co.uk or call 01904 661140 to find out more.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

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.

The Financial Conduct Authority does not regulate estate planning, trusts, Lasting Powers of Attorney, or will writing.