Protection plans have been notoriously underused by consumers, but the Covid-19 pandemic has forced many to consider how they would support their lifestyle should they find themselves unable to work.
The reason for this underuse is that people typically do not see the need to have it until after a trigger moment.
Most mortgage holders, for example, told Metlife UK in its study published in April, that it would take an unexpected change in circumstance to occur before they would consider purchasing protection.
The majority of those surveyed cited illness as the main driver for taking out a protection policy (31 per cent), with a further 25 per cent stating a change in job or employment status.
Adam Higgs, head of research at Protection Guru, adds that Covid heightened people’s sense of mortality: "It showed they are not indestructible and that they don't know what is coming round the corner. That has helped to convey the genuine need for income protection."
By the time such an event occurs, it is too late to protect against it.
The emergence of the global pandemic has increased the risk both of serious/long-term ill health and unemployment, leaving financial advisers eager to learn how best to communicate with clients on the right time to buy protection, and the possible risks incurred if those timeframes are missed.
As with all types of insurance and protection schemes, premiums increase in accordance with two key variables: age and state of health.
It becomes increasingly difficult to acquire IP past the average retirement age. For a population that is both living and working longer, industry experts say this trend needs to be reflected in new products and plans being brought to market.
“With IP there is a natural cut off age, so even if you’re still working at 70 you will not get IP. There is definitely scope in the industry to restructure and improve this,” says Rob Harvey, protection product specialist at Protection Guru.
In recent years, life insurance has become more flexible, with an increasing number of providers designing plans for over 50s and 60s, although these come with the obvious caveat of increased costs compared to cover taken out by younger customers.
Meanwhile, critical illness and IP are not only more expensive but they are also less available the older the client is.
“The maximum age for IP tends to be around 64 years and there tends to be fewer providers offering CI policies to those above 65,” says Charlotte Nixon, proposition director at Quilter Financial Planning.
An opportunity to educate
The pandemic has also presented an opportunity for financial advisers to educate customers.