Still wounded by the payment protection insurance (PPI) mis-selling debacle, the protection industry’s reputation has suffered in recent years. A survey in November last year revealed that almost two-thirds of advisers fear their clients don’t understand income protection (IP) products and confuse it with the toxic brand of loan protection insurance.
As many advisers have acknowledged, income protection represents a worthwhile investment should your clients be unfortunate enough to encounter health issues, especially when considering how little the state pays out.
Those who patiently navigate through the various options can often find policies that offer good value for money. Here are a few tips on how to find a plan that best suits your clients’ individual needs.
1. Document all health issues when applying. Insurers have been known to turn down claims relating to pre-existing health conditions that weren’t previously flagged up. No matter how small or irrelevant it seems, be sure to disclose as much as information as possible or you could find claims being rejected later down the line.
2. Target own-occupation cover wherever possible. Such policies will pay out if your client is unable to do their job, unlike ‘activities of daily living’ and ‘activities of daily working’ policies, which only tend to pay out if you are unable to dress yourself or fulfil the most basic of tasks.
3. Consider Stip products for bridging the gap. If the available IP looks too expensive, you could consider reducing the monthly payout, extending the deferred period or considering a short-term income protection (Stip) policy. Stip policies are cheaper than regular IP and can be used as a stopgap before taking on long-term cover.
4. Explore ‘back to work’ options. This will provide a clear indication of the type of help that will be offered in the event of a claim, including rehabilitation and counselling. While extras might be very valuable to clients lacking a support network, they may be an irrelevant extra cost to some.
5. Shop around for smokers. Most providers charge smokers premiums of around 50 per cent more than non-smokers, although there are also a few providers who don’t add extra premiums for smokers. Friendly societies are often a good bet for premiums that don’t penalise.
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