“If I had my way I would write the word “insure” over every door of every cottage and upon the blotting book of every public man,
because I am convinced that, for sacrifices that are conceivably small, families can be secured against catastrophes which otherwise would smash them forever.”
Winston Churchill
The impulse to protect our loved ones is one of the most basic instincts a person can have. Yet the fact remains that many people don’t take out sufficient insurance to protect themselves and their family should something happen to prevent them from being able to work. And if the main breadwinner in a household suddenly becomes unable to earn a wage, it can very quickly lead to serious financial hardship.
So how do you protect yourself against the financial risks associated with disability, accident or death? Life Insurance is the most common form of protection, but most policies don’t provide cover for accidents or sickness. You can purchase Accident, Sickness and Unemployment cover, but this tends to provide just short term protection, typically for a period of 12 months, and that’s unlikely to meet your needs should you suffer a life-changing event like a serious accident.
So what are the options? Income protection insurance is, in many respects, the most basic insurance of all, and can provide for your bills and day-to-day living expenses in the longer-term should the unexpected happen, whether that’s an accident, critical illness or other traumatic event.
Choosing the right kind of protection is critical, but it’s also it’s also important to get the right level of cover, because people’s requirements change as they get married, have children, move jobs or have their terms of employment changed.
In recent times the media attention on the Banks failings in wrongly advising customers on PPI insurance, it is no wonder that people will be put off by this type of policy, and if you couple this with the mass coverage that Claims Companies have given this subject, it compounds the misery people have suffered and the stigma associated with this product area.
We have also come across new clients who had been mis-sold PPI Insurance, even retired people who quite clearly had no need for such a policy, and this type of unsuitable advice can leave such a bad taste in people’s mouths, that it can sour the opinion of this type of policy for a long time.
Sadly an inevitable result of such poor and appalling advice is the confusion that remains over the various types of policies, and the danger is people will ignore providing themselves with any type of cover. Even well read financial DIY’ers would have just cause to be confused between PPI (Payment Protection Insurance), MPPI (Mortgage Payment Protection Insurance), ASU (Accident, Sickness & Unemployment cover), PHI (Permanent Health Insurance), IP (Income Protection) …….. all basically set up to do the same thing – pay an income when you are not working, and its important when looking at the areas of protection that you choose the right policy.
When correctly examined, there is a great need for a form of Income Protection for most people.
The Way Forward
One of the big threats in our life to achieving our financial goals is the loss of our income, yet it is one of the factors outside of our control. Our income ensures financial security for us and our families for the rest of our lives, and how many people have sufficient emergency funds to help with the regular monthly outgoings if that income stops.
Income protection should be considered a cornerstone of all financial planning, yet sales of Term Assurance and Critical Illness greatly outnumber Income Protection . These statistics are quite surprising when you consider the probability of claiming under these different types of protection cover, people are far more likely to be off work for 6 months or more (due to accident or illness) than suffer from a critical illness or die during their working life.
There is a common misconception from a lot of people that their employer, family or the State would provide if they were unable to work because of a serious illness. However, when you look at the facts, it is obvious that the majority of clients would suffer a shortfall between their monthly outgoings and that provided by the State or other sources.
It is the job of qualified and experienced Independent Financial Advisers (IFA’s) to explain the differences in cover types and recommend where appropriate, and we believe there is still a major need for the right type of cover, and think Winston’s quote is timeless and to the point.
