How to manage clients' income protection needs

And yet, term life sales continue to dominate the market, with term life-only accounting for 52 per cent of sales in 2018 (accelerated critical illness accounted for 31 per cent). 

The relative merits of income protection versus critical illness are often discussed within our industry. 

However, the indisputable fact remains that it is incredibly difficult to quantify the ‘need’ for critical illness in terms of a final number.

How much do you protect? For how long? How do you balance the differing needs of a condition with a quick recovery time against a long-term degenerative disease? 

What is clear though, is that providing advice on income protection can be significantly more complicated than doing so for term life or critical illness.

A significant virtue of income protection is that the need can be easily computed, and thus the product can act as a financial companion throughout the entirety of incapacity, regardless of cause.

A misunderstood product?

Income protection sales are clearly not matching the demand we know there “should” be in the market – albeit latent. 

It is important to recognise that the potential causes for this are numerous: the relative attractiveness of alternative products; the lack of awareness for income protection; the lingering association with PPI; and numerous other reasons could all play a part in income protection’s relative sluggishness.  

What is clear though, is that providing advice on income protection can be significantly more complicated than doing so for term life or critical illness. 

In income protection there are many pertinent variables, or ‘settings’, that the adviser needs to consider when creating a protection solution. 

This is particularly important since the eventual premium, naturally a key metric within any advised solution, can vary significantly depending on the settings chosen. 

We believe the product’s complexity has a significant part to play in its take-up rates.

Below, we provide an overview of the key considerations to take into account for each setting in order to provide a bespoke income protection recommendation. 

How to choose the right income protection settings 

Benefit amount

This is how much of their ongoing expenses the customer wants to protect.

As advisers we need to be guided by product affordability.

A common industry approach is to protect solely the essential costs, whether that be mortgage or rental payments, childcare or other essentials, which is a defensible means of providing a financial buffer against short term incapacity.