Britain's changing demographic make-up is removing the traditional protection trigger points - and adding new ones. Mark Jones explains.
Despite the importance of maintaining these luxuries, the research showed that over eight in ten adults say they do not have any protection in place to cover their income should they be unable to work due to accident or illness. Which leaves the real household essentials at risk, never mind the ‘essential luxuries’.
The government has made no secret of its move to reduce our dependency on the welfare state. Incapacity benefit has been changed to the Employment and Support Allowance. A process which drastically reduced the number of people than can make a successful claim for being unable to work on the grounds of ill health.
The economic drivers of the past few years make it nigh on impossible for the state to promise to look after all who can no longer work, and this is something, as a nation, we are going to have to get used to.
People must fully understand the need to provide their own financial safety net, whether that is through self-insuring with savings, or looking to protection insurance to cover their needs. As this certainly is not a trend that looks set to reverse anytime soon.
The result of the retreating welfare state should act as a catalyst to get more of those who are able to adequately protect their income.
But unless they are aware that the state may not look after them, that there is a credible alternative to PPI available, that insurers do pay claims when they say they will, and protection is not as expensive as they might think it is (despite the Gender Directive), people will continue to have little or no protection and the protection gap will continue to grow.
Advocates needed
With more advisers predicted to be active in the protection market in light of RDR, the hope would be that at the very least there will be many more advocates out there talking to people about the importance of protection.
It has been well documented that the age demographic of our country is changing, with a mass of baby boomers hitting retirement age. Retirement is usually a time when people actually have less of a need for traditional protection, as their mortgage is usually paid off and their children tend to have flown the nest.
This changing demographic could provide an influx of opportunities for whole of life cover perhaps, when people plan to either mitigate the cost of inheritance tax, or leave behind a sum of money to cover other costs once they are no longer around. But equally, retirement may evolve to be considerably different than the traditional image we have in our minds today.
