Now is the time to speak with clients about protection plans

Now is the time to speak with clients about protection plans

The current crisis has highlighted the importance of having an adequate protection plan in place that will provide individuals and their families with a robust financial safety net and allow them to feel financially secure in all circumstances.

Figures released by the Association of British Insurers show that in 2019 more than £5.7bn in protection claims was paid out, accounting for 98.3 per cent of all claims made. That equates to £15.8m paid out each and every day.

In response to pressure for adequate protection measures to be put in place, the government announced the new life assurance scheme, which promised £60,000 would be made payable to the families of NHS and social care workers who lost their lives to Covid-19 while working on the frontline.

While there is no denying that this is a significant sum of money – indeed, £60,000 is reported to amount to twice the average pay of NHS staff – for many families, it still is unlikely to provide enough of a financial safety net.

This is especially the case for families who were financially dependent (full or in part) on a deceased loved one.

Key Points

  • More people are seeking protection at the moment
  • What is ‘enough’ cover is subjective
  • Many think they are covered by their company

Of course, what constitutes ‘enough’ is highly subjective. However, the reality that many people are falling short of receiving adequate financial support during these unforeseen and challenging circumstances should encourage all of us to review our current protection plans and check that we have enough cover in place to ensure our longer-term financial wellbeing.

There is evidence to suggest that more financial advisers are engaging with their clients on protection. LifeQuote reported a 29 per cent increase in protection applications in January 2020 when coronavirus was first talked about in the UK.

Anecdotal evidence indicates that many financial planners have been supporting their clients with financial planning housekeeping, including trusts; however, the witnessing formalities for wills are still a challenge in a self-isolated environment.

The role of the adviser 

Past surveys carried out (most notably by Swiss Re) to measure the existence and size of the protection gap in the UK have ascertained that the gap is real and material.

Swiss Re’s 2020 Term & Health Watch showed a strong rise in protection policies over the past decade (see table), but if this were to be compared with the entire working-age population of the UK, the gap between those with income protection and those with none becomes all-too clear.

It seems that one of the main reasons for the gap in personal protection is that individuals believe they are already covered by their company’s scheme and therefore do not require any further protection.

Many of us will not even know how much cover is provided, let alone look to challenge whether the level of cover amounts to enough.

Now more than ever, financial advisers have a responsibility to be talking to clients about their protection plans – in relation to both individual and business protection – and should be encouraging them to challenge the level of protection they have in place. To do this, advisers must ask the challenging, but important questions: ‘Do you have cover? How much? Is it enough?’