What is better, long-term or short-term protection?

This article is part of
Guide to lifestyle insurance

Says Emma Thomson, life office relationship director for Lifesearch: "A short-term product makes sense to offer, especially for those people who have never bought insurance before, such as millennials."

Generally, lifestyle/short-term income protection policies will cover a percentage of your client's monthly pay.

This could be enough to cover their mortgage or rent payments or any other debt repayments they might have and enough to ensure they can live comfortably if unable to work.

While some short-term income protection products are underwritten, many others are not - which can help to speed up the application and acceptance process.

This adds to the flexibility of such cover, which can be attractive to clients. Andrew Sajo, spokesman for The Source (formerly its head of strategic relationships), says: "The flexibility of short-term contracts suits fluctuating commitments and incomes.

"There is the added flexibility of limited intrusive underwriting, due to the term."

He also advocates simple, common policy wording that can accommodate income, mortgage and rent under one contract, which he says will help to reduce fear of mis-selling.

Then there is the level of cover. With most short-term policies, the majority of - not the whole of - the individual's gross monthly salary is actually covered.

For example, Covea's short-term income protection plan can provide cover of up to £2,000 per month or 60 per cent of the client's gross monthly salary.

However, while injuries such as a broken leg or short-term illnesses will be covered, there are generally several conditions excluded, such as more serious illnesses like debilitating strokes.

Moreover, generally they contain an exclusion clause in relation to pre-existing conditions. But as the Financial Ombudsman Service has warned, the way in which exclusions are framed vary from policy to policy where no detailed underwriting has taken place.

A claim could be turned down if the consumer suffers from a pre-existing condition they ought reasonably to have been aware of.

As its website states: "This means that even if the consumer has had no medication - and has seen no doctors - in the specified period, the insurer may still try to exclude the claim, if it considers that the consumer suffers from a pre-existing condition that they ought reasonably to have been aware of."

So it is worth making sure the consumer knows what they are likely to be covered for.

Short-term at a glance

  • More flexible.
  • Cheaper.
  • Not generally underwritten.
  • Good 'starter' protection product.
  • More conditions excluded.
  • Less certainty of premium renewal.

Apples and oranges?

But is this really a case of comparing apples and oranges, or is there a more nuanced view?

For Mr Lakey, it is really up to the customer's needs.