The myths and misconceptions of protection: part 3
Robert Betts, Market Development Manager at Legal & General, discusses the common misconception that it's too expensive to protect income. But, he says, the real question is, can you afford not to?
Legal & General’s recent Deadline to Breadline report revealed six common myths and misconceptions around protection. In our previous blog we looked at how people often don’t value themselves as their biggest asset. In this post, we look at how you can tackle the perceived high cost of protection.
‘Income protection is too expensive’
How much is too much? Quite often, saying income protection is too expensive is a throwaway line or an excuse because the value of a policy and what it does has not yet been appreciated.
The research shows that nearly a quarter of people state this as a main reason they don’t have income protection. Would they still say this if they had taken advice from a specialist adviser?
Do you put your clients in an informed position about how important their income is? What discussions take place around their “Plan B” and what they would do if their income ceased?
Let’s consider for a moment how hard our income works as soon as it arrives in our bank account. It could pay for:
- Rent/mortgage
- Council tax
- Utilities (electricity, gas, water)
- Car (loan, Lease)
- Insurance (buildings, contents, mobile phone, pet, car)
- Childcare
- Broadband
- TV & streaming (subscriptions, sport & movie channels)
- Mobile phone
- Savings, emergency fund
- Pension
These are just examples of the main bills and expenses that we have. Which ones are important to your client? What would they need or like to maintain if their income stops?
Bring your client’s financial commitments to life
Do you use a detailed budget planner to highlight expenditure or discuss why they spend their money the way they do? By focussing on how customers spend their money, reflecting on the pleasures and joy they get from it and gaining personal insight into their lives, do you then present a scenario about how these bills and expenses would be paid without their monthly income?
Our research found that 52% of people said they would be willing to pay more than £20 a month to protect their income once they had considered how their lives would be impacted if their earnings stopped.
How do you and your clients reach an agreement on what they can afford to spend on this type of cover? How much cover would £20 a month spent on an income protection policy give them? There is of course no definite answer to that question; it all depends on individual circumstances, the needs identified and your skill as an adviser to help them establish which is best for them. For instance, Legal & General offers a comprehensive range of income protection products with options for renters, the budget conscious, and businesses too:
- Income Protection Benefit (including the Low-Cost option)
- Rental Income Protection Benefit (including the Low-Cost option)
- Low Start Income Protection (including our Low-Cost option)
- Executive Income Protection
Start the conversation sooner rather than later
Engaging early on with our clients about protecting their income, setting out what will be discussed, and the information needed before an appointment is very useful as it focuses them on any company benefits they may receive, such as death in service and sick pay entitlement, prior to the first meeting.
By identifying what support they would get from their employer, together with how much they have in savings and any state benefits they might be entitled to, a client can then start to evaluate whether it would be enough to meet their monthly expenditure.
This fact find naturally leads into the discussion of income protection, how it works, how it would benefit them, cost options and the benefits of the additional support offered by these plans such as Rehabilitation Support Services, which provides back to work support for mental and physical health.
And don’t forget your self-employed clients. They will probably have no sick pay or death in service benefits to rely on. Their financial situation may be even more vulnerable, but they will still have the same bills outgoings as the above.
The big question is, “Can you actually afford not to protect your income?”
The best line I ever heard about this cost question was from an adviser on one of our sales skills courses. He said, “If the last objection is cost, I have not established worth in my client’s head. If they fully understand the value of the protection, then cost will usually become affordable”.
It’s not the client’s fault, it’s just we have not made a good enough case for the expenditure.
