We’ve recently seen the launch of a much needed industry charity-led campaign to raise awareness of income protection among consumers.
It supports Seven Families (hence the name) across the UK who have lost their main income without any financial support in place. Having seen the stories of the families who through accident or sudden disability have had their lives changed forever, it highlights more than ever importance of advising on protection, particularly income protection, as the part of financial planning that underpins everything else.
Here we give advisers ten things to think about when recommending income protection to clients in today’s market.
1. Investigate employee benefits.
When talking to a client about the need for income protection it’s a rare occurrence that they know what they are already entitled to.
Recent research from income protection specialist Drewberry found that 26 per cent of people don’t have income protection because they believe their sick pay would be sufficient to look after them, yet in reality only 14 per cent would receive sick pay for more than six months while 24 per cent would receive no sick pay at all.
It is impossible to make recommendations on income protection without first knowing a client’s sick pay benefits and whether there is a group income protection policy in place.
Peter Chadborn, Director of advisory firm Plan Money, says: “Most clients overestimate the benevolence of their employer and rarely have exact details of their benefits to hand. In all cases, prior to any recommendations being made the employer handbook should be inspected by the adviser.”
2. Prove claims are made.
Claims statistics have been a useful tool for many years to help combat negative perceptions that claims aren’t paid. While more traditionally figures have been released for critical illness cover, most income protection providers now publish their stats.
In the first move to release long-term claim statistics, the insurer British Friendly recently revealed that over the past five years it has paid 96 per cent of income protection claims on average.
British Friendly CEO Mark Myers, says: “It is about the bigger picture of consumer confidence. If claims are at the heart of our culture, you are proud about them and want to shout about them. The industry should be publishing its claims numbers much quicker and much louder to get the best outcomes for our joint customers.”
Tom Conner, Director at Drewberry Insurance, says: “It is important as an adviser to know when an insurer receives protection business it will follow through on its promises. Long-term paid claim statistics are a useful tool to demonstrate that income protection policies consistently pay out, and that insurers are not trying to decline every claim, which is how the public often perceives them.”
3. Occupation class importance.
One of the most crucial aspects of income protection, and a point that can never be made too often, is making sure your client understands which occupation class they are being covered under.