Say the word ‘protection’ to most people in their 20s and early 30s and it brings to mind income protection, critical illness cover and life insurance.
In other words, scenarios that many of us do not care to think about, such as an illness which prevents us from working, or situations many people just do not believe will ever happen to them, including death at an early age.
But even if someone does not own their own home, have children or a partner, and even if they do not have a history of illness in the family, it is very likely they will still benefit from some form of protection.
Paul Roberts, head of protection at Old Mutual Wealth, says: “The issue with protection is convincing people, no matter what age, to accept hard truths. These truths are misfortune, illness or injury can occur to them.”
He admits often these become more accepted with age.
“However, just because knowledge and engagement is something that happens, traditionally, in later life does not mean that protection isn’t important for everyone,” notes Mr Roberts.
“For a variety of reasons, millennials are reaching traditional life stages, such as getting married, getting a mortgage, having children, at a later age. They tend to cite this as a core reason for not needing cover and putting it off.”
He suggests the industry needs to explain protection is crucial no matter the lifestyle.
Fraser Glass, financial planner at Fryer Glass, outlines: “They may or may not be in a long-term relationship and even if they are they may not be married or in a civil partnership. They may or may not have financial support from the bank of Mum or Dad. All these factors are highly important in how they should manage their financial lives.”
He lists a number of scenarios that could arise should those in this age group fail to purchase a protection policy:
- Premature death, leaving a surviving partner with young children, with no, too little or the wrong type of financial protection.
- Premature death leaving a partner (no children) over insured and prey to the stresses of ‘undeserved’ lump sum wealth.
- The wrong people benefit because of a failure to make wills or use trusts.
- You get a lump sum benefit due to illness when what you really need is a regular income to replace the income you have lost when the illness prevents you doing your main job.
- You pay for insurance that will not pay out because an employer is already providing it.
Last year, Aegon published figures which showed cancer as a whole made up 60 per cent of all critical illness claims it received in 2016, while breast cancer on its own accounted for 31 per cent of these cancer claims – the biggest single cause of Aegon’s critical illness claims that year.
In the same year, the youngest breast cancer claimant was 37 years old but back in 2007, Aegon’s youngest claimant with that illness was just 24 years old.
As Emma Thomson, life office relationship director at LifeSearch, points out: “Millennials might think they don’t need protection insurance, but they shouldn’t dismiss it because even young adults are at risk of getting sick or passing away early.
“It’s often dismissed because they do not have a mortgage or children, but they will still need to ensure they can pay the bills and rent if they are unable to earn because of illness or injury.”