Promoting the value of protection
Steve Bryan (pictured) director of distribution at The Exeter
When misfortune strikes, income protection is one of the most valuable policies a person can have.
But for too many people, insuring their income is not something they think about.
Despite the benefits that income protection offers, it is often met with scepticism and misconceptions among consumers.
As an industry, we need to work together to ensure clients understand the value of income protection and bust the myths around this vital product segment.
No one wants to talk about illness or loss of work. It doesn’t make for a fun dinner party conversation!
Even for independent financial advisers, initiating a conversation with a client that forces them to consider how they’d cope in the event of unforeseen loss of income.
Nonetheless, it is vital to communicate the benefits of income protection to clients, explaining how it can provide a vital financial lifeline, especially if a single individual is the main earner in the household.
Another reason to promote the value of income protection is the changing demographic of the UK workforce.
Nearly five million active workers in the UK are self-employed, up from 3.2 million at the end of 2000.
Self-employed individuals are particularly vulnerable to potential sudden loss of income.
Advisers can highlight the financial backstop that income protection policies offer to the self-employed.
When talking to self-employed clients, advisers can point out benefits of IP insurance, and position it as an essential element of the financial mix alongside pensions, investments, mortgages and the like.
‘Providers don’t pay out’ is a common phrase that has plagued the protection market, yet this is simply not the case.
The industry paid out over £5.3bn in claims last year. At the Exeter, we paid 93% of claims in 2018.
Furthermore, the benefits of income protection go beyond just financial.
Income protection helps people recover and get their lives back on track faster by reducing financial concerns while they recover.
It stretches beyond the person who is ill to include the wider family, partners and children.
It’s understandably human to take an ‘it will never happen to me’ attitude, but we need to make sure that customers understand the need to protect their household and financial position.
It’s easy to think illness can only happen to someone else – but in reality, it could strike anyone at any time.
Preparation is key – and income protection is a vital part of this mix.