Q: What are the options available to me when a client says they can’t afford protection insurance?
A: With more and more pressure on disposable income, it is no surprise that clients are finding it difficult to commit to buying a protection plan.
But the danger is, without a financial safety net in place, how would they make ends meet if they were no longer able to work and earn a salary each month? Fortunately, there are a number of different options available which means that even those on the tightest budgets can have some element of cover in place.
Option one is to reduce the amount of cover provided. Option two is not to provide a menu of benefits but to restrict the cover to say only income protection so at least the client’s income is protected.
Option three is to consider family income benefit (income payments) for life and/or critical illness rather than a lump sum payment. A decreasing lump sum payment will also reduce the cost, so this too could be considered.
Adding on an option for any of the cover provided (not decreasing cover) to increase with inflation, will protect the value of the cover. If a client isn’t able to afford the extra cover, one year later, they may be able to delay any increase until the following year.
In addition to the above, demonstrating how the cost of cover increases with age, could make younger clients more receptive to taking out cover.
Take for example, a 30-year-old looking for £100,000 of life with critical illness cover. If the plan is taken out now they will pay on average £38.42 per month, according to Moneyfacts.
If they leave it for five years and take out the same amount of cover at this point, they will then have to pay £59.91 per month. That’s an increase of 56%. It also ignores the fact that taking the same sum assured five years later means the cover will, in real terms, not have kept pace with inflation. This goes to prove that it is never too early to take out protection cover.
Cost has always been an issue when it comes to buying protection insurance even before the recession. We just need to make sure people understand just how important financial protection is, and that there are products to suit every budget.
