Chris McFarlane, head of protection, at LV= explains what Income Protection is and why more intermediaries are selling it today.
We recently asked people what their top concerns and priorities are at the moment and perhaps unsurprisingly, maintaining their current income came out as a key priority. What was more surprising was the fact that just 4% of adults said they had taken out insurance to replace their income if they were to become ill and unable to work. And amazingly, three times more people told us they have pet insurance than have income protection cover!
The bottom line in the argument for protection (and the question to ask your clients) is quite simple &ndash how would they afford to pay their mortgage, loans, credit card payments and other regular financial commitments if they were unable to work for a sustained period of time?
At LV= we believe that income protection should be at the heart of every financial planning discussion. But as we can see from the statistics above, that’s not always the case. Common misconceptions are that if something does happen, then there are safety nets in place. Unfortunately, people’s savings have been depleted, sick pay is often not as generous as people think, state benefits won’t really help maintain most people’s current income levels and simple denial is no-one’s friend when the worst does happen.
The issue here is really about enabling consumers to ensure they have adequate protection in place, to cover them if their income stops for a sustained period. But let’s just tackle a few of the criticisms levelled at Income Protection (IP).
More straightforward than people think
The perception that IP is complex is a common one, but is that really the case? Basically, with IP, if you cannot work because you are ill, it pays out. There’s nothing complicated about that.
Easier and quicker than people might think
Applying for IP cover is no longer as time consuming as many advisers might think. Over recent years, technology and online systems have broadened into IP, and many providers now use tele-interviewing services. Together these streamline the application process, often providing instant decisions, cutting down on the need to fill out lengthy application forms and avoiding lengthy delays for GPs to return medical reports.
Cheaper and better value than people might think
Advisers can work with their clients to provide some decent, long term protection cover for people on the tightest of budgets. As an example, a 29 year old male office worker could buy £1,000 a month cover to age 60 for as little as £14.62 a month. That’s replacement income potentially amounting to over £350,000 for about the cost of a pint of milk a day. That seems pretty affordable.
Selling protection has started to move up the agenda for many advisers, as the realities of the current employment market and wider economic climate hit home to customers. LV= supports adviser efforts by offering table-topping rates, improved product features such as our free CI offer. In addition, LV= offers advisers a comprehensive toolkit to help them sell more IP more easily.
If advisers want help in encouraging their clients to think about protecting their income, they (and their clients) can always watch the ‘Day Our Lives Changed’ film from LV=. In this short film, a real couple tell their story about a horrific car accident and what they had to endure with no IP cover in place. It’s a compelling and thought-provoking tale with a simple message.