OpinionNov 12 2014

Family values rescuing the protection message

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Seventh heaven. Seven sisters. Seven deadly sins. The seven wonders of the world.

Into the lexicon of sevens now comes “Seven Families”. An innovative financial campaign designed to spread the gospel to the general public about that little-known product called income protection insurance. I wish the campaign every success because such a good idea has been a long time coming.

In my days as a cub reporter on Money Management magazine back in the late 1980s, it was drummed into me that protection insurance was the bedrock of family finance. Lay down the protection foundations and then start thinking about saving for the future.

But somewhere along the line, the protection message got lost. Of course, most people take out life cover when they take out a mortgage to buy their first home, and sometimes this will have critical illness added on. And many companies provide their employees with life cover – death-in-service benefits – as part of their employee benefits package. But income protection insurance, probably because of cost and the new auto-enrolment requirements, does not really get a look in.

One financial adviser I spoke to last week suggested that the death of the direct sales forces has done protection insurance no favours. Those sales armies, she said, were brought up on the same principles that were drilled into me at Money Management. Protection first, long-term savings to follow.

The result is that there are only three million income protection policies in force, and given that there are more than 30 million people working today in the UK, that is a big protection gap. A yawning gap.

Lay down the protection foundations and then start thinking about saving for the future .

This is where Seven Families comes in. The idea, supported by Disability Rights UK, is to demonstrate how having income protection insurance, together with rehabilitation support and counselling, can help put people’s lives back on track.

Of course, the clock can never be turned back for those people who do suffer life-long disabilities or life-changing illnesses, but the extra income can provide a financial lifeline and in some instances give people the necessary help to get them back into employment.

For a year, Seven Families will provide seven families with income replacement benefit. The amount will be based on the maximum level of cover they could have been insured for before they became unable to work.

I was fortunate enough to talk to the first person, chosen by Disability Rights UK, who will take part in the Seven Families campaign. A delightful woman called Tracey Clarke who is suffering from optic nerve atrophy. Her prognosis is poor – she will eventually lose her sight and is already relying on a guide dog called Oakley to help her get around.

Tracey, 48, is a pharmacy technician by training, but her failing sight has meant she had to give that up long ago. And as her husband Tim is now her full-time carer, life financially has been tough. The family home was sold to stave off bankruptcy and they now live on a narrow boat, trundling up and down the country’s canal system. They survive on Tracey’s disability living allowance and Tim’s carer’s allowance.

Thanks to Seven Families, Tracey and Tim will receive a £600 boost to their monthly income. It will not be life-changing, but it will let them do a few things a future on benefits would never allow.

For example, they will be able to buy a couple of extra solar panels for the boat, new waterproof boots for the both of them, and a new computer for Tracey complete with software that caters specifically for her deteriorating eyesight. To say she is thrilled with Seven Families is an understatement. She is over the moon.

The cynics among you could argue that to help just seven families in this way is a little meaningless. But I think that would be an unfair judgment.

If the project works and maybe one or two of the seven are helped back to work (Tracey, I know, wants to try her luck as a writer), it could be used as a powerful lobbying tool by the insurance industry against the government as the welfare state continues to be rolled back.

Already, the likes of Zurich have argued for tax incentives to be given to employers who provide income protection schemes and individuals who take it out.

The Association of British Insurers has also weighed into the debate with calls for employees to be given an annual statement showing them in pounds and pence what they will get from the state and their employer should they suffer a debilitating long-term illness or disability.

The thinking behind this is that if employees see the figures in black and white they might be encouraged to make up any shortfall with insurance. It is a sound proposal given that 250,000 people every year are forced to give up work because of illness, many of them becoming immediately dependent upon the state for financial support.

So, let us all support the Seven Families campaign to the hilt. Payment protection insurance was chronically mis-sold by the banks and building societies. Income protection insurance has been chronically under-sold. Financial crimes, both.

It is time to put this vital insurance back on the map. So get out there and encourage your clients to buy it.

Remember. Income replacement, the seventh wonder of the financial world. The other six? You decide.

Jeff Prestridge is personal finance editor of the Mail on Sunday