As financial planners we know and are fully aware of the benefits financial protection offers, covering various scenarios. We plan for the worst but hope for the best.
However, when speaking with younger generations (through speaking with friends), protection policies are few and far between and the statistics would back this up.
The phrase, 'I’ve got death-in-service through work, that will cover me', often comes up in conversation, but is this enough? When I ask them this question, they don’t know the answer, but all too often assume it is.
For a surviving partner and children, they would be left to deal with the financial implications of not having enough.
As a new father myself, the first thing I did was ensure that, should something happen to me, my wife and child would be financially sound. But this does not tend to be a thought for others who aren’t in this profession.
Perhaps it is because as financial planners we constantly look at the ‘what ifs’ and understand the risks, but this shows the knowledge and education we need to improve on.
This phrase also only considers one scenario: death. What about being unable to work due to illness, accident and job loss? Many are not aware you can cover such events but these can all have an equally lasting impact to the household.
Royal London’s "Tackling the gender pension and wealth gap" report shows that once people own a house, the likelihood of them having financial protection increases greatly. It's likely such people have spoken with a mortgage adviser when taking out a mortgage, who has then discussed life cover as part of that.
As an example of this, one of my close friends was re-mortgaging a few years back and at that time was single, worked in sales and much of his income was commission-based. The mortgage adviser discussed taking out life insurance to cover his mortgage should he die.
But what is the bigger risk to his finances, his death or not being able to work and make the mortgage repayments?
When I put this to him, he agreed not being able to work and not having an income but still having the mortgage repayments was a bigger risk for him, but he hadn’t even considered such a scenario or that he could cover this.
In his eyes, if he passed away, he did not see not being able to repay the mortgage as a priority, as he had no partner/dependents to leave the flat to.
This was a firsthand example I had of a conversation. In 2018 the Financial Conduct Authority's consumer panel published a report by Bdifferent, which found “income protection is rarely mentioned by brokers or advisers”. We need this to change.
A mortgage adviser is usually the main person someone would speak to in such a scenario and sometimes solely having life insurance just isn’t the solution to an individual's circumstances.
