So, in a market where so many people are cutting back on what they view as 'non-essential' cover, what place does income protection (IP) realistically still have?
PREPARATION IS EVERYTHING
As Lord Baden-Powell, founder of the Scout movement, once famously said: ‘Be prepared'. Never has this motto been a sounder piece of advice for your clients than in the current economic climate.
While it may be prudent for them to consider cutting back on some of life's little luxuries, IP is one essential outgoing that should remain. This is because it offers the peace of mind that comes with the knowledge they have something to fall back on should they become unable to work and earn a living due to illness or accidental injury.
Where life insurance only pays out in the event of death and critical illness only pays out if you are diagnosed with specific illnesses, IP is the most sensible personal insurance product to take out.
It offers a direct, tangible benefit for the consumer and their family, which is a particularly financial savvy choice to be making when times are tough.
DYB DYB DYB
Returning to the Scout analogy again, another famous Scouting phrase ‘dyb dyb dyb' stands for ‘do your best' which, when it comes to protecting your lifestyle and dependants, is of course something we all aspire to.
When discussing cover with your clients, many might offer the excuse that state benefit will help them to provide for their family should they become unable to work and earn a living.
So it comes as a harsh reality check when they discover the Government will provide just £89 a week1. As the average weekly spend currently stands at £3,332, this could mean funding a shortfall of more than £243 for basic living costs, with the distressing knock-on effect of causing financial hardship for their loved ones. So when it comes to protecting their family, perhaps a good example of not having 'done their best'?
According to figures published by the Office for National Statistics, more than two million people are currently off work due to long-term sickness3. This serves as a stark reminder that people do get ill and that you should be talking to your clients about protecting their income - before it's too late.
SURVIVAL OF THE FINANCIALLY FITTEST
In the event of becoming too ill to work or having an accident that prevents your client working, IP could provide them with a much-needed income, allowing them to cover up to 60% of their earnings while they are unable to work.
Having IP in place is both an intelligent as well as safe solution should circumstances taken a turn for the worse - in short; it's about helping them to create a solid, financial foundation for now and the future.
AFFORDABLE AND COMPREHENSIVE COVER
When it comes to cost, a typical Income Assured Plus contract with Cirencester friendly could cost from as little as £18.24 per month4 - offering them value for money and the peace of mind that they deserve.
A range of additional options are available - including choosing to receive their benefit from day one of the illness or accidental injury. The contract can be tailored to suit your clients' needs -and there are no premium loadings for riskier occupations, smokers, gender or hazardous pursuits, making it a realistic and affordable option.
CANNY FORWARD PLANNING
If your clients remain unconvinced, and are still worried about maintaining a certain level of insurance expenditure, it's always worth looking at their options.
If they have savings in place, and these are easily accessible, this could potentially tide them over for a period without pay when they are unable to work. With the average person's savings standing at £2,4743, at a stretch, it might provide a seven-week comfort zone.
This would allow for a four or eight-week deferment period on their contract and the longer the deferment period, the lower the premium, which is naturally a major selling point.
But if your client has below average savings then longer deferred period contracts could still be a concern - which is why Cirencester friendly also offers cover from Day One.
SHORT-TERM BENEFITS Vs LONG-TERM CONSEQUENCES
Of course we all hope the current economic uncertainty will be short-lived, but however long the stormy ride, it's important that both you and your clients maintain some perspective about what's important in terms of longer-term financial planning.
Put simply - a rash decision about the affordability of IP now could cost your client dearly later.
1. Department for Work and Pensions (DWP) April 2009: Based on the ESA basic weekly rate of £89.80 for those in the work-related group.
2. Based on a survey by Yorkshire Building Society. The average level of savings is £2,474, the average spend per month is £1,445.
3. 2.1 million off work due to long-term sickness, out of a 21 million workforce in the UK. These individuals are not part of the supply of labour but are important as they are potential labour supply in the future. Source: Economic & Labour Market Review | Vol. 3 | No. 2 | February 2009, Office for National Statistics.
4. Figure based on a 34 year old self-employed builder who earns in the region of £22,000, looking for an 8-week deferred period. He would receive £1,092 per month in benefit.
Cash plans are fast becoming one of the most relevant products for IFAs selling into a group environment. Attend Cover’s Breakfast Briefing: Cash Plans on Tuesday 27th March 2012 in London to discover more about sales techniques, employee health and how and why IFAs should get involved with the cash plans market. Register your FREE place today.
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