How to bring up protection policies with clients 

But what happens when a client is diagnosed with a life changing critical illness? That is where personal protection policies come in: life insurance, CI insurance and income protection can provide a vital security blanket in precarious times. 

Figures from Schroders Personal Wealth show life insurance as the most popular form of personal protection insurance, with one quarter of UK adults (24 per cent) already owning it.

However, this figure drops significantly for CI insurance and IP, which are only owned by 10 per cent and 7 per cent of UK adults, respectively. 

Among those without personal protection, a fifth (19 per cent) said that they do not have enough knowledge about it – the same proportion of people who feel they do not need it. 

Dispelling mortgage myths  

Jiten Varsani, a mortgage and protection adviser at London Money, highlights protection planning as a separate but fundamental part of any mortgage/financial planning for a client. 

At Protection Review's event ProtectX3, which took place earlier this year, Varsani questioned why mortgage protection takes so much precedence over other types of policies: “We would never think about just insuring half of our house, or a quarter of our car, so why do we feel it’s okay to protect just one aspect of our client’s needs?”

Varsani added that when he approaches the conversation with clients, the focus remains on the need rather than the product: “The key part of this is highlighting the importance of the client’s income... and to discuss what would happen in the event of death or ill health.”

He emphasises that discussing protection only when a client gets a mortgage is a long-standing industry and consumer misconception.

According to VeriSmart (a property inspection company in the rental sector), based on current rates, tenants privately renting will make up 50.7 per cent of the housing market by 2039.

To meet growing demand, financial advisers must adapt and consider IP insurance and CI cover to meet the demands of renters as well as homeowners. 

However, this does not discredit the significance of protecting a client’s mortgage. 

We would never think about just insuring half of our house, or a quarter of our car, so why do we feel it’s okay to protect just one aspect of our client’s needs?--Jiten Varsani

Managing mortgage protection 

According to comparison website Finder, the average mortgage size for first-time buyers in 2020 was £170,301. 

Chris Dunne, protection proposition manager at Scottish Widows, says: “Mortgages and protection go hand in hand. The mortgage helps your clients buy their dream home, while protection helps them to hang on to it. But it can be hard to put the right emphasis on the need.

“Make protection the cornerstone for the affordability conversation. Introduce it early in the meeting to help your clients get the mortgage they need. Ask them to explain their employee benefits including sick pay and help them think about the realities of putting in place a strategy for keeping their home should the worst happen."

When it comes to phone insurance, we can physically see the product and use it regularly, however protection policies just appear as direct debits, with little understanding of what the service offers.--Martin Reynolds

Conscious clients 

The Covid-19 pandemic was a real example of people on a mass scale becoming conscious of their mortality. Consequently, this created a shift in the way clients viewed themselves; as less indestructible and more bound to protecting their loved ones and assets. 

This has led consumers to be more open about health and mental health and, as a result, interest in protection policies have increased. 

The figures from SPW also found that while only 28 per cent of UK adults currently have some form of personal protection insurance, Covid-19 has changed people’s attitudes towards it somewhat. 

Almost a third (29 per cent) of those currently living without personal protection insurance said that the pandemic has made them more likely to consider protection, rising substantially to 53 per cent among those who earn more than £50,000 a year.

Martin Reynolds, chief executive of SimplyBiz Mortgages, says: “In a world of uncertainty, protection policies give a client a sense of reassurance and control. When life gets tough, being able to prioritise health rather than worrying about bills and mortgages is an ideal situation.

“When it comes to phone insurance, we can physically see the product and use it regularly, however protection policies just appear as direct debits, with little understanding of what the service offers. Thus, it is important to pick a policy that works for the individual and has added perks that are very beneficial should you face an unexpected situation."

Protection policies are not limited to payouts, though. Clients can benefit from a range of added benefits including access to doctors, bereavement counselling and quicker testing for medical conditions. 

Protecting employees

Varsani explains that lifestyle protection planning should start with the first employment a client has. 

Research from Direct Line Life Insurance revealed that one in six companies (16 per cent) reduced an employee’s wage to statutory sick pay after four days of sick leave, but found more than 2.5m employees were unaware they would face a significant salary shortfall if they are unwell and are unable to work.

Even though the UK is a welfare state, there is a misunderstanding that consumers will be taken care of long term. Government support is simply not enough for clients looking to cover all their bills and expenses. 

Nafeesa Zaman is a freelance journalist