Better off Dead? Preparing families for the unthinkable

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Bright Grey's Robin Carr shares his own experience of how devastating a lack of financial protection can be for families.

That sounds harsh, doesn't it? Let me explain what I mean. I come from a widow's story family.

My dad died at the age of 44, leaving my mum to bring up five children, I was just five years old at the time. He also left her something else - a huge financial nightmare.

Despite living very comfortably on his income when he was alive, after he died and his income was gone, my mum soon realised she had serious money problems.

The only life cover my parents had between them was enough to pay off the mortgage, that was it.

Mum's only income was from the State and her only asset was the house as they hadn't managed to save much and kids can't eat bricks! 

So began a rapid financial decline which continued well into my mum's retirement; which was the last thing my dad would have wanted for us.

My mum had to sell the family home within a few years of my dad's death and my childhood was characterised by her constant struggle for money.

Family holidays, private education, keeping up with our friends' lifestyles - all of these things were impossible.

Why did this happen? It's simple; nobody ever told my parents they needed to protect more than just the mortgage. They hadn't considered what the financial consequences would be if one of them died too soon.

But it could have been worse. What would our life have been like if my dad hadn't died that day? What if he'd been in an accident, or had a stroke and was left paralysed? What would life have looked like for us then?

They had not taken out critical illness cover or income protection. At least my mum had enough money from the life cover to pay the mortgage when my dad died. So, harsh though it may sound, from a purely financial perspective, he was ‘Better off dead'.

A recent Income Protection report from Mintel suggests that only 9% of working households in the UK has long-term income protection cover and that only 10% of working households have any critical illness cover.

And while 37% of those households say they'd get by on savings in reality how long would their savings last? Worryingly, the backdrop to these statistics is a broad range of welfare reforms that place responsibility firmly on the shoulders of the individual.

The most recent welfare reform proposals include turning the Support for Mortgage Interest payment into a loan from April 2018 and extending the waiting period from 13 weeks to 39 from April 2017.

That means if your clients don't have enough of the right type of cover they will face a lengthy nine month wait before they may be eligible for help with their mortgage payments - I wonder whether their rainy day savings will see them through?

But the sting in the tail is if benefits do kick in any payment made would need to be paid back with interest. What would the implications be for those clients who don't have appropriate cover in place?

It seems that despite an awareness of the need for protection - 48% of people said they believe individuals should take responsibility for protecting their income by taking out insurance - most people don't take any action.

As an industry, how can we turn awareness into action?

There's been plenty of discussion on this topic with all sorts of ideas to engage consumers, but it's not just consumers we need to convince.

Getting some advisers on board can be just as challenging and many can't or won't embed advising on protection into their business model.

Lack of time, lack of belief and lack of expertise are just some of the reasons we hear, but one look at the stories on the 7 Families site makes a compelling argument for the conversation to at least take place. To not do so is a missed advice opportunity but it's more than that. Who else will speak to your clients about their protection needs?

With such a big shift towards self-reliance, isn't there a moral obligation to point out to your clients the very real risks people face when they don't have adequate cover in place?

And they do face real risks as a quick scan of the news headlines demonstrates the fragility of life and of health.

Robin Carr is head of adviser development at Bright Grey

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