Mike Farrell, Protection Sales and Marketing Director at LV=
Our second Reaching Resilience report1 explores the views of UK working adults on their financial resilience and challenges their perception of what makes a good plan B if they couldn't work because of illness or injury. The report highlights the opportunity you have to discuss protection with your clients.
Almost half of the working population said they'd rely on savings
This is an objection to protection that some people can relate to. Almost half of workers surveyed said they would rely on savings if an illness or injury left them unable to work. Yet our research showed that 4 in 10 workers don't have the suggested 3 months of average outgoings saved (around £5,000 for the average household2.)
When we explored this further, we found:
- Around 4 in 10 have less than £5,000 saved
- A quarter have less than £1,000
- 1 in 10 have no savings at all
Clearly this isn't a sustainable safety net for most people, especially when you consider, according to LV= claims data from 2023, that the average Income Protection claim lasted for 5 years, 6 months. Sharing these findings with your clients could get them to think about how long their savings would support them. Unless specifically an emergency fund, it's also unlikely your client's original saving goal was to cover outgoings due to an unexpected life event. How prepared would your clients be to dip into these hard-earned savings?
Plenty think they could rely on others to get by
Another common theme from the research was the assumption that they could rely on a partner, parent, or other family members to cover this loss in income due to incapacity. However, when we asked ‘who else relies on your income' the most common response was their partner, and 52% of working couples said they need both incomes to meet their outgoings. This statistic is even higher for younger working couples and first-time buyers.
In fact, according to the research the average worker is supporting 3 people with their income (including themselves). Losing an income can create a domino effect, and it is always good to remind your clients that an Income Protection policy can be more than just about protecting them.
Some advisers ask their clients who are couples:
- How would you cope financially with just one income?
- What would you do if it's the primary earner whose income stops?
- Even if you can cover essential outgoings, how prepared are you to sacrifice other aspects of your lifestyle?
- How many people are you supporting with your own income? What would be the impact to them if you couldn't work?
The opportunity is out there for advisers
We asked workers how financially resilient they'd feel with insurance that pays a lump sum for a serious illness or covers their income if they can't work due to illness or injury. Over 50% could see the benefit of these types of protection policies in providing peace of mind for their financial future.
Discover more insights in the LV= Reaching Resilience report
Clients aren't always aware that protection is the solution. As an adviser, you're uniquely placed to demonstrate the role that protection products play in building financial resilience.
Tools offered by providers like the LV= Risk Reality calculator can help create the need in the client's mind. They can reinforce and support your conversations by highlighting the life risks that drive the need for protection.
1The data used in our Reaching Resilience report comes from a survey of 4,000 nationally representative adults conducted for LV= by Opinium between 23 November and 3 December 2023.
2Average outgoings is based on data from our LV= Wealth and Wellbeing Research – June 2023. Moneyhelper suggest a good rule of thumb is to have 3 months of outgoings in savings.
