Every day a quick scan of the news reveals some new horror that will change the lives of those involved forever – the unlucky accident on the way to work, a tragic illness that cuts a young life short or the holiday accident that leaves more than just a scar to cope with. We barely take notice of them as we get on with our day. Those involved however have to pick up the pieces and in the world we live in there is very little in the way of support to help them.
How many of your clients still get six months paid sick leave? With the days of generous state support seemingly long gone, this combination is a powerful argument for comprehensive cover. And yet take-up of income protection remains stubbornly low. Instead, people (though still not enough of them) buy life cover because we all die eventually right? Well that’s true but most of us don’t die within our working lives. The risk of long term absence from work, however, is much higher. And that’s exacerbated by the fact that retirement has, for many of your clients, been pushed back and probably will be again.
Previously, people didn’t take out mortgages that extended into retirement. However, we’re looking at a generation of people with less defined life stages which means they could still be in the mortgage market well into their sixties, possibly even their seventies¹. And what comes with age? Yes, that’s right, illness. So just at the point when they’re finally looking forward to a happy retirement the whole deck of cards could come tumbling down. And remember, welfare reforms make the old cry of “the state will provide” seriously outdated.
If you’re in any doubt, let me remind you of the most recent proposals where Support for Mortgage Interest will kick in after 39 weeks instead of the current 13 weeks and will, from April 2018, become a loan, not a benefit. That loan will need to be repaid with interest. And that’s not the only change we’ve seen introduced. The Government is targeting those on long-term disability and sickness so the support is minimal, not guaranteed and not unlimited. How many of your clients have enough savings put aside to keep everything going for nine months? Probably not many.
You might argue that clients are young and they have plenty of time to take the protection they need but that’s not strictly true. As we get older we tend to encounter conditions such as high blood pressure and many of us will experience a health scare in some form. That significantly pushes up the price of insurance on older lives, if they’re still insurable at all.
While clients will tell you that they can’t afford protection, that’s not necessarily true either. Take a look at our lifestyle calculator – even better get your clients to put their details into it. It adds up the cost of all those incidental expenses we never budget for. They’ll be shocked at how much they could save and how much protection this could buy.
State benefit reforms are likely to tighten even further. With the latest proposal, the Government is delivering a clear message that they will not invest in your client’s property by paying the mortgage when things go wrong. It makes sense to talk to them about having enough of the right protection so that they don’t find themselves living the modern horror story. And if you need help our critical illness report is a fantastic, visual tool that can help you talk to your clients about the real risks they face.
1 – Council of Mortgage lenders, Retirement borrowing policy, May 2015
Denise Wond
Marketing Manager, Royal London