Kathryn Knowles: The cost of missed protection - Part One

Many people know Cura as a specialist protection broker. What may surprise some people is that we have hundreds of advisers who refer to us. Why?

Yes, we step in when people come across a tricky medical condition, or other high risk client situation. But these aren't the only reasons. Sometimes it can be that people don't know where to start with the protection conversation, or simply do not have time to do it.

There is nothing wrong with that. I don't know the foggiest about mortgage or pensions, so I signpost people to advisers that do.

What I want to do, here, is take you through the protection advice process that one of my team has recently been through. I'm going to show you the potential cost of skipping protection needs.

The advice process

My colleague Krystle Skelton recently advised a young family on their protection needs. In this case the couple approached us to arrange protection insurance, already with an idea in their head of what they want. This isn't always the case, but even if it is, it is the job of an adviser to support clients with what they think they want, whilst also telling them what they need.

Krystle had this to say:

"Mr & Mrs L had two young children and she wanted to make sure that they would be financially secure, if either of them sadly passed away.

"We had a really nice chat, sharing stories about our kids and balancing the work and homelife. As we spoke more I was able to do my factfind and establish that they had a mortgage liability, their occupational benefits and the budget for the cover.

"When it comes to providing protection advice, the budget is vital. You can build an incredible protection package, but if the client cannot afford it, then it is not really fair to offer something that they cannot have.

"Next step, research. Remember, it's not just about price, it's about quality, underwriting and value added benefits too!

"When making my recommendation I was clear that I had not gone for the cheapest insurance policies available. I recommended policies that offered extras like access to RedArc nurses and mental health support, amongst other things.

"To strip it down to the main parts of the cover, I recommended:

"The package was pushing their budget so I gave them the options for the cheapest insurers too. I wanted to make sure that they felt comfortable to say which parts they did and didn't want.

"I covered the mortgage with a decreasing life and critical illness policy. Using their net income, I recommended some family income benefit policies that would take their youngest child to an age of independence. They already had four years salary as death in service, which could be used for family protection, but even though they don't plan to change careers, you just never know what might happen.

"I wanted to recommend income protection cover but this was trickier. They were both police officers and already set to receive two years full sick pay. I advised them of a couple of policies I could do, but suggested that they speak with the Police Mutual or MetFriendly to double check the policies they could access there."

As the recommendation stage progresses, it is important not to be pushy and to make sure that you listen to the client, that you always do what is best for them. Krystle could have pushed her income protection options, but she didn't, she directed the client to the most appropriate option.

It's also incredibly important as an adviser you may know what is best for the client from an advice point of view, but you do not necessarily know what is best for the client from an emotional point of view.

A full protection package can be quite expensive, easily going into a few hundred pounds for a couple. For some, this can be a lot of money to face paying out each month, when you have a mortgage and young kids. But the beauty of protection insurance is that you can make lots of tweaks to tailor the policies to your client's specific needs and budget.

You might look at this and think Krystle should have done something differently. More critical illness? Definitely income protection?  No family income benefit? Advice comes from your own experience, it is subjective and your views will play a factor in what you recommend. We are not robots and there is often no single ‘right solution'.

Fast forward

Five years from now. Mrs L has come back to us and has been diagnosed with breast cancer, it is very aggressive and things aren't looking good.

There is a problem though, one that I haven't mentioned so far. This client is actually future Heidi Loughlin. She wasn't advised by Krystle, she was advised elsewhere to just get life insurance. This means that for now, she has no insurance policy to help herself and her family during this time.

She cannot claim on the terminal illness benefit on her life insurance, as the treatment she is undergoing is extending her life. She has a terminal illness, but she will need to wait until the NHS treatment stops and she is given 12 months or less to live, before she can make a claim.

Find out the true cost of the protection that Heidi missed out on in part two next week.

Kathryn Knowles is managing director of Cura Financial Services