Likewise, on average, life expectancy continues to rise, which is great – however, it may often mean that we are living longer, but in poorer health.
This is where CI comes in. It pays a lump sum (or income) upon diagnosis of a serious condition and most insurers these days cover 50-100 conditions (and more), including the main ones: cancer, heart attack and stroke, which combined represent the majority of claims.
Alan Lakey, director at Highclere Financial Services, who also runs product comparison service CIExpert, says: “A simple question as to whether a secure source of income would have been beneficial opens up the conversation and many CI plans include payment for being intubated on a mechanical ventilator for 7 or 10 days.”
On conversation openers, Ben Burgess, senior adviser at Life Search, says: “Ask/understand the client’s views around sick pay, savings, future career plans and any other financial safety nets.”
CI policies have gradually evolved since the 1980s to cover more conditions, including the development of severity-based payouts, where the amount paid out depends on how serious the illness is (early-stage cancer pays less than advanced cancer, for example). While others have gone for the simple approach of just covering the core three conditions.
A favourite question to ask clients about protection has been whether or not clients wanted the cheapest or the best value –most of the time the response has been: ‘What’s the difference?’, which is a great way to begin explaining the basics and adding value as an independent adviser.
Mr Lakey says: “Most conversations will often be based around protecting a mortgage and I always broach the subject of protection at the very outset.
“I ask whether including the essential mortgage protection plans have been included within the budget. Waiting until the mortgage has been offered often backfires as they have other imperatives and it can be difficult to enjoy a sensible conversation.”
Ideally, IP complements CI as it covers different situations. A good way to compare the two is to consider that CI pays out upon diagnosis of a potentially life-threatening illness, whereas IP pays out if you cannot work.
Therefore, IP should cover areas such as stress, depression, a bad back or a broken hip – all of which could seriously impact a person’s ability to work for many months or years, but would not be covered by CI.
With IP, a deferred period is chosen – that is, how long are you unable to work before the income starts paying out?
