How to start the children's protection conversation

While they agree having help paying vets’ bills or fixing a car after an accident is crucial, they will need a steer towards getting themselves covered.

A survey in September 2017 from Zurich found the compulsory insurance policies were far higher up a consumer’s understanding than any other form of insurance.

The most popular types of insurance policies purchased: 
1.    Home contents insurance – 70 per cent
2.    Motor insurance – 68 per cent
3.    Home buildings insurance – 57 per cent
4.    Travel insurance – 38 per cent
5.    Life Insurance – 30 per cent
6.    Pet insurance – 18 per cent
7.    Critical illness cover – 11 per cent
8.    Income protection (individual policy) – 6 per cent
9.    Income protection (via employer) – 5 per cent

This is why intermediaries are so vital to helping get Britons covered against the possibility their income dries up, they are unable to work, or they have to leave work to look after a child.

But having a conversation with clients about critical illness can seem intrusive, especially so when it concerns their children.

Paul Dalgliesh, head of protection propositions at Aviva UK, says: “For intermediaries, having the conversation isn’t easy but the financial and emotional support offered through children’s critical illness cover can make a huge difference to a family.” 

However, according to Chris McNab, head of protection proposition for LV=, it does not help to be coy about raising the issue with clients.

He says: “No-one wants to imagine their child suffering a serious accident or becoming critically ill, but protection policies can give parents peace of mind they will receive support if this were to happen.”

He believes it is important advisers speak with clients to educate them about the benefits of taking out protection, which will not only cover them but also their children.

Getting to know the client

Rob Harvey, independent protection specialist for Drewberry Insurance, comments: “For parents who are seriously concerned – and no doubt there are many young parents now in this position, following the publicity around the recent tragic case of Charlie Gard – we would encourage them to think carefully about what they are really trying to protect.”

Garry Webb, head of compliance for financial advisory firm Roxburgh Financial Management, believes assessing protection is a vital part of the fact find.

“This comes down to the fact-find process and the demands and needs of the client,” he says. “Putting the client in an informed position on what is available, and in what circumstances, is paramount.”

Mr Webb also advocates regular reviews of the client and their circumstances, which he says is “important to ensure the adviser can give the client clear and relevant advice as the client’s family situation changes, and the protection market develops”.

Sell the add-ons

Most modern insurance policies come with added benefits, such as wellness apps to help maintain a healthy lifestyle, Best Doctors or RedArc services, telephone counselling or free second opinion referral services. 

Mr McNab calls these good selling points: “Advisers can use the added benefits on policies, such as free legal advice or a Doctor Services app, to demonstrate the value of protection products to their clients and their families, beyond just the financial support at the time of claim.”

Johnny Timpson, protection specialist for Scottish Widows, agrees these are important benefits: “While the menu of support available will vary by provider, typically it will provide the policyholder and their family with assistance that can be accessed at any time without having to make a claim on the protection policy.

“It’s also worth noting employee support services are increasingly becoming a feature of occupational life, critical illness and income protection provision.”

Sell the opportunity 

There are key milestones in a client’s life which provide the opportunity for advisers to talk about protection.

Peter Hamilton, head of strategic partnerships for Zurich, says: “Most advisers will want to understand a family’s changing personal and financial circumstances, and there are a range of events that could trigger the need for further discussions on protection needs.”

The Association of British Insurers provides a checklist for people when it comes to considering whether life cover is relevant to their needs, such as getting married or raising a family. 

These ‘milestones’ can also apply to other types of policy. 

Life cover is important if you are:

•    just married.
•    a young couple just starting out.
•    new parents raising a young family.
•    a mature family starting to think about the future.
•    a retiree who may survive their partner and need financial support.

Some reasons for taking out life cover:

•    getting married/civil partnership.
•    buying a house.
•    starting a new job.
•    applying for a mortgage or loan.
•    the birth of a child.
•    divorce.
•    receiving an inheritance.

Income protection

In addition to discussing cover for children’s illnesses, Mr Harvey believes advisers should discuss the impact on the parent if they have to give up work to become a primary care-giver.

He notes: “An adult with £50,000 of critical illness cover would usually get £12,500 of children’s cover as part of the package [and children’s CIC is capped at £25,000 in most cases, depending on how much CIC the parent has].

“In most cases this is no substitute for losing a year or more in salary. In reality, coping with a child’s serious illness is likely to mean one parent has to quit work to look after the child, and could mean selling the house or any other radical lifestyle change.

“From this perspective, £12,500 isn’t going to go very far, so for parents concerned about this sort of scenario, it makes sense for advisers to look at income protection for the parent that will cover them in the event they have to leave work.”

A children’s cover rider can be added to this income protection plan with some providers, while others – such as Aviva – offer an additional family carer benefit that pays out approximately £1,500 a month for a year in this sort of scenario.

Additional information

Aviva’s Mr Dalgliesh adds: “Advisers should be mindful not all children’s cover is the same, and some providers have not only taken steps to broaden coverage but also to increase the amount payable.

“If children’s cover is relevant to customers, advisers should know which providers offer the most generous and flexible cover.”

Advisers wishing to make comparative decisions between various policies and providers may find it useful to examine third-party information available from companies such as Defaqto, Synaptic, FTRC and CI Expert (which was created by financial adviser Alan Lakey).

It is also worth making sure what benefits your clients have through their employer.

Many companies offer a group life scheme, and some may also provide PMI, but as FTAdviser has reported previously, not all employers communicate their benefits packages effectively. 

simoney.kyriakou@ft.com