And with the chances of contracting and surviving a serious illness before retirement relatively high, it makes perfect sense to take it out. So why, then, are sales not more buoyant?
The products are well-marketed and providers are constantly reviewing and improving the definitions to meet the needs of consumers. But is it actually the products themselves about which we need to raise awareness or is it more to do with raising awareness of people’s need to protect their lifestyle? In the past, the message from the government was: you do not need to look after yourself because we are here to do it for you. That has all changed in recent years with the shake-up to the benefit system, but in spite of this many still say they will rely on the state if they cannot work.
If people do not take financial responsibility for themselves and their families, who will? Statistics tell us that someone is more likely to claim against an income protection or critical illness policy than they are to claim on a life insurance policy before they retire. Those statistics alone should make the case for taking out protection insurance. And if more evidence is required, research from MacMillan Cancer Support recently showed that 83 per cent of cancer patients are on average £570 worse off a month because of their illness. Their income goes down because they are unable to work and other costs increase. Travel costs for hospital appointments and increased heating bills are just some of the additional costs faced by someone with cancer.
So, what are the alternatives of not having a financial safety net in place? Relying on state benefits will be hard. Statutory sick pay is only available for 28 weeks and while it may have increased by 85 pence from £85.85 to £86.70 a week, is this really enough to live on? Experiencing an illness or accident that is severe enough to stop someone working for a lengthy period is worrying in itself, without the financial implications of losing out on a regular income. Most households would struggle to cover the cost of their monthly outgoings on this amount of money if their usual salary stopped. While it might be a temporary solution, living on state benefits will not enable someone to maintain the lifestyle they had prior to their illness.
While paying into a pension is drummed into people from an early age, taking out protection falls way down the list of priorities. Yes, it is an insurance that will hopefully never have to be used, but is that not the case for all insurances? No one takes out home contents or travel insurance in the hope that their home will be burgled or their holiday cancelled. They take it out for peace of mind.
These are difficult times and, when every penny counts, advisers need to have a good argument to persuade clients to part with their money. Suggesting people take out smaller amounts of cover will certainly help in making sure individuals and families have at least some cover in place. There is evidence to suggest that using real-life case studies is a huge help in selling critical illness cover. Providers have a range of case study material that advisers can show clients to help hit the message home. We are really up against it with hard-pressed households now at full stretch financially, but you could say that is even more of a reason to take out cover. So we must continue to push the protection message, but ultimately it is up to individuals to make that first step and take responsibility for themselves.
Roger Edwards is managing director of Bright Grey & Scottish Provident
Key Points:
- Critical illness cover is easy to understand.
- If people do not take financial responsibility for themselves and their families, who will?
- These are difficult times and, when every penny counts, advisers need to have a good argument to persuade clients to part with their money.
