Across the industry, it’s a widely held belief that a client’s income is their most valuable asset and safeguarding it should be the number one protection priority.
Income protection (IP) is designed to offer that much needed safety net against income shocks - it works, when you can’t. Yet far too many people - including many of those who have received financial advice-don’t have IP.
The fact is that the likelihood of being off work for a period of time is far higher than people think.
Nearly two million are off work due to accident/illness for more than a month every year), and many of the reasons people have for not taking it are actually misguided.
Ironically, financial advisers aren’t immune from this effect either, with just one in 10 advisers holding their own IP policy.
At LV=, we know it can be tough to persuade clients to take out IP when they’re under the illusion that they’re invincible or will ‘get by’, yet we believe more can and should be done to help more people become more financially resilient.
That’s why we decided to look into some of the most common reasons people cite for not taking out IP and examine how valid they are.
1. It is too expensive
While IP is often more expensive than life or critical illness cover, there is a good reason for that - the risk of falling ill and being off work for an extended period is much higher than suffering a serious illness or dying during working life.
That being said, IP can be much more affordable than you think and there are many ways the cost can be brought down.
For example, ‘budget’ Income Protection which will pay any individual claim for up to two years, is less than half the cost of full IP, with premiums as little as £10 a month.
Alternatively, shaping the amount of cover to protect specific debts or essential costs, or reducing the term of the policy to cover peak financial commitments, such as until end of education for children, can make IP more affordable.
2. I’m young, fit and healthy
It’s common for clients to believe that they will never have a need for IP, but unfortunately no one is immune to illness or accidents.
The LV= Risk Reality Calculator is a simple, quick online tool advisers are using to show clients the likelihood of them being off work long-term sick during their working life. And the younger the client is, the cheaper the premium; it pays to start young.
3. My family will look after me
It’s common for people to assume family will help out if they weren’t able to work. However, the reality is that although family members might be able to afford to for a short while, for most people it’s likely to put strain on them too.