One of the biggest things we have learnt from coronavirus is the need for financial resilience, writes Legal & General’s Richard Kateley
I have spent most of my working life talking to advisers about the need to talk to their clients about protecting the one thing that they all rely on: their income. It is my belief that all our protection conversations should start with considering protecting our client's income.
I think the biggest thing we have learnt from the coronavirus crisis is that - whether we are employed, self-employed, have a mortgage or rent to pay, a salary big or small - having a financial back-up plan is vital to help us through difficult times.
Within a week of the UK shutdown people were desperate for financial support. We saw record numbers apply for Universal Credit (1); we saw the government step in with support to cover 80% of salaries for people who were furloughed. The reason for this was simply that people were desperate to cover their outgoings and food for their family. But the speed of this need was most shocking - after just one week.
It is true, that in most cases, an income protection (IP) policy would not have helped with the situation we found ourselves in, as the vast majority of people lost their income due to employment ceasing and not due to ill health. Equally they have had the support from the government replacing some of their earnings.
But when life returns to normality and if you lose your ability to earn an income due to accident or ill health, it is likely you won't have the same support. You might be one of the lucky ones who has an occupational income protection scheme, but if not you will be looking at living on statutory sick pay (SSP) which is a mere £95.85 a week (3). After that you will have to rely on your savings and then support from the Bank of Friends and Family.
I just hope that this is a real wake-up call for the whole country about the importance of a good financial back-up plan and the value of financial advice.
COVER has teamed up with L&G to help advisers talk about income protection with clients.