I was struck by a recent keynote address at the Cover Protection & Health Summit by broadcaster Simon Thomas on the importance of thorough holistic protection advice. It reminded me of one of Drewberry’s clients who needed to claim. Like the Simon Thomas case, I believe this serves to illustrate the crucial role advisers play and the importance of providing protection advice across your clients’ need areas.
Several years ago, a client came to us looking for income protection. They’d been running their own consultancy business for a year and were finally getting around to looking at protection.
When advising a client who gets in touch with a very specific need, it can be all too easy for the adviser to be blinkered into simply satisfying that immediate need and facilitate the ‘sale’ of whatever product the client wants to purchase. However, at Drewberry we believe in truly holistic advice and therefore insist on a full and thorough fact-find, establishing the full spectrum of protection needs.
In the case of our consultant client, we discovered that despite supporting a stay-at-home spouse and two young children, the only life insurance they had was to repay the mortgage, with nothing to provide for other living costs.
The protection gap of UK households is something we’ve focused on in our own research; Drewberry’s 2017 Protection Survey of 3,000 working adults found that only 37% had any form of Life Insurance. Among those who did, it’s likely that a significant proportion wouldn’t have an adequate level of cover for both mortgage and family protection. More worrying still, only 6% reported having income protection insurance.
Consider family income benefit
In order to adequately support our client’s family should the worst happen, not only did we recommend income protection, but also an additional family income benefit policy. Often overlooked, FIB pays a replacement monthly income to the deceased’s loved ones for a fixed term, and can provide an invaluable complement to mortgage protection.
Just a couple of years after setting up the policy, the client got back in touch. They sadly notified us that they’d been given a terminal cancer diagnosis and had less than 12 months to live.
Life Insurance usually includes terminal illness benefit as standard, allowing for a premature claim should the policyholder receive a terminal diagnosis.
In certain circumstances with family income benefit, the insurer may offer a claimant the choice of either monthly benefits or a lump sum. After a little back and forth to negotiate the lump-sum offer, the client received a payment of over £800,000. This was a policy with Scottish Provident, part of the Royal London Group, so well-done Royal London!
Tragically our client passed away a little over a year after their diagnosis, aged in his early 40s. The line most of us hear countless times — “It will never happen to me” — just isn’t the case.
The alternative doesn’t bear thinking about
All we can do is imagine this scenario without any insurance. The alternative - carrying on working, relying on limited state support or friends and family to pay the bills whilst managing a terminal health condition - is simply not worth thinking about.