In the past, when some advisers were considering a protection solution for their clients, it could be viewed as a choice between recommending either income protection or critical illness.
A number were working under the illusion that there may have been too much duplication to consider taking out both covers.
Sometimes it can be helpful to go back to first principles as both these products were designed with different outcomes in mind: income protection would replace a monthly or weekly payment; critical illness claimants would receive a lump sum should they suffer from one of the defined critical illnesses.
One could argue that advisers and clients should not be forced into a definitive choice between protecting their income, which underpins their lifestyle, or the potentially devastating financial effects of a serious illness.
It is interesting to note that advisers are increasingly recommending more menu-based solutions. It would appear, unsurprisingly that the protection market is moving away from single product solutions.
According to iPipeline market data, the amount of income protection policies sold as part of a multi-benefit policy rose by 8 per cent between Q4 2019 and Q1 2022.
In 2021, iPipeline also saw a 9 per cent rise in multi-benefit plans sold, with sales of single family income benefit policies falling as more business was written as part of a menu plan.
Menu-based solutions present a more tailored approach so that people can potentially maintain the family’s lifestyle at the same time as protecting their personal income, enabling them to strengthen an existing financial safety net or put one in place.
Menu plans are proving to be popular
Applicants can combine several protection policies into one process, spanning life cover, critical illness and income protection. This can be tailored to suit their budget and lifestyle needs, with the chance to adjust later as the client’s needs change.
Children’s cover can be added as the applicant’s family grows, with the ability to change features to balance risk and account for lifestyle changes.
For example, with some critical illness products, there is an option to take out enhanced children’s cover at an added cost, which includes cover for child-specific conditions, payments for pregnancy complications and increased payout levels.
Insurers are now evolving their propositions to include more valuable, family-friendly features. As an industry, it is great to see more adviser recommendations that offer holistic, tailored and effective solutions that combine income protection, critical illness and life insurance in one application.
As our lives are already bombarded with flexibility and convenience, it is only right that protection should follow suit. Clients should be able to use different parts of their plan so that dependents within their household could also be covered.
For example, the benefit of inflation-linking income protection means that the income from the policy can meet rising day-to-day living expenses, while the lump sum from a critical illness policy could cover more immediate concerns regarding paying off a mortgage.