Tom Conner makes the case why advisers should prioritise income protection.
It is common knowledge amongst IFAs that income protection is one of the most important types of financial protection, Which? even said that alongside life insurance, income protection is a ‘must-have’ insurance.
The last thing you want when off work long-term sick is to realise that the Government or your employer isn't going to look after as you might have assumed, and that you really should've taken out that insurance policy you once thought about.
Except, the thing is most people don't realise that proper income protection even exists, which is largely because hardly anybody promotes it.
From comparison sites and banks through to various consumer websites, mentions of Income Protection can be hard to find.
It is a vicious circle because sales are low. Just over 120,000 people bought IP last year and we know that some insurers are reluctant to spend time and money promoting a product that doesn't sell.
But maybe it doesn't sell much because it isn't being developed and promoted.
At Drewberry 60% of our protection business is income protection, rather than life cover. This isn't because we've found a magic formula for selling it, it is because we think it is the most important priority for most people we speak to and as such it is prioritised accordingly.
We've seen some excellent moves this year from several insurers to improve their cover and only offer ‘own occupation' cover, and we are excited about the IPTF Family Support Initiative, but the product itself still needs work.
Some of the terms and conditions remain complex and declined claims, albeit even if just a few, in the press and social media do not help.
The world has changed and insurers need to move with the times just like everybody does.
Some people think IP doesn't pay out; that it is only for layabouts who don't want to work. But the average claim length for IP with some insurers is 5-10 years.
And let us remember that a bad back, stress or depression is not going to be paid by a critical illness policy.
A further myth is that young people don't buy or need cover, but this simply isn't true.
In fact, the total cost of cover for many people is less when you buy it at an earlier age, even though you are insured for a longer period.
In the three months up to February 2013 nearly 80,000 people under the age of 35 started claiming Government Employment & Support Allowance due to incapacity. So come on. This is a call to those with budgets to develop and properly promote income protection.
A call to everyone who really believes income protection is the core product every working adult ‘must have'.
Tom Conner is a director at Drewberry Insurance
