It can be easy to overlook your own financial security if you’re focused on your business. However, if you’re relying on your business to deliver an income, it’s important to take steps that could improve your financial security.
If you haven’t already taken these steps, it’s worth considering whether they should form part of your financial plan.
1. Have an emergency fund you can use to pay for short-term outgoings
The unexpected can happen and it could harm your financial wellbeing. From an unexpected bill to needing to take time off work due to an illness, how would your finances cope if you faced a short-term shock?
An emergency fund can provide you with cash savings to fall back on when you need it most.
Yet, research from Standard Life (20 January 2026) suggests that it’s something many people are overlooking. 1 in 5 UK adults said they would need to take on debt to cover a £250 emergency, such as using a credit card or borrowing money from a friend.
How much you should have saved in your rainy day fund will depend on your needs. A general rule is to have between three and six months’ worth of expenses in an easily accessible cash account. This means you have enough to weather short-term shocks, which can provide peace of mind.
2. Take out appropriate financial protection
While an emergency fund ensures you can meet outgoings immediately, it often isn’t enough to provide medium- or long-term security. In some cases, financial protection could help you fill this gap.
Financial protection would pay out when certain circumstances are met. There are several different options to choose from, so you can find one that provides the type of cover that suits your priorities and concerns.
Among the most common types of financial protection you may want to consider are income protection and critical illness cover.
- Income protection: If your income stops due to an accident or illness, income protection would pay out a regular income. The income provided is usually a proportion of your normal salary, up to around 60%, and can enable you to meet essential costs without having to deplete your savings or other assets. Usually, an income protection policy will pay an income until you return to work, retire, or the term ends.
- Critical illness cover: This would pay out a lump sum if you were diagnosed with a critical illness that is named within the policy. It could mean you’re able to take time off work, retire early, or make adaptations to your home if necessary. You can choose the level of cover to suit your needs. However, keep in mind that a critical illness policy will not cover every illness – you should carefully check how comprehensive the policy is.
If you have a family or dependents, you may also want to consider life insurance. This would pay out a lump sum to your loved ones if you passed away during the term. It could mean they can maintain their lifestyle and don’t need to worry about money should the worst happen.
You may also take out protection for your business, which could ensure operations continue or you benefit from a cash injection when the unexpected happens. For example, key person insurance may pay a lump sum to the business if a covered employee dies or suffers from a critical illness.
3. Register a Lasting Power of Attorney
Registering a Lasting Power of Attorney (LPA) gives someone you trust the ability to make decisions on your behalf. There are two types of LPA covering your financial affairs and your health.
While it can be difficult to think about losing mental capacity, this important step could mean a loved one can support you should you be affected by an accident or illness.
Again, you can take a similar step to protect your business. A business LPA would appoint trusted people to manage the business should you lose the capacity to do so.
Contact us
We could help you prepare for the unexpected. Please contact us to discuss the steps that might be appropriate for you and your business.
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 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 Lasting Powers of Attorney.
