Association of British Insurers’ statistics show the protection industry pays out £9.4m each day to help families cope with the financial fallout from illness or death.
Yet many are still sceptical about the real benefit of having such policies.
While publishing claims statistics and using case studies helps, many people are also unaware of additional valuable policy benefits and how they can ensure a policy’s relevance over a long period of time.
When speaking to a financial adviser recently, he stated that many product benefits such as guaranteed insurability, waiver of premium and benefit guarantees are undersold, and that as the quote portals don’t always show enough detail, even specialist advisers can overlook them in the heat of the moment when discussing protection with clients.
So here we look at ten of the most important options that advisers should be aware of when selling protection, and how they can add value to clients.
1. Waiver of premium.
Adding ‘waiver of premium’ ensures that cover will continue if the client is unable to keep paying the premiums, either while claiming on the policy, or due to long-term absence from work because of ill health.
It is also possible to include ‘waiver of premium on death’ benefit, which means the policy continues for an insured surviving partner without premiums being paid.
Ewart Mathias of Sandringham Financial Partners advised a young family to take out a VitalityLife decreasing life and serious illness policy with waiver of premium on death.
Sadly, just 23 months later a claim was made on the serious illness cover, and eventually on the life insurance part of the cover as well.
The waiver of premium on incapacity meant that while the client was ill and unable to work, the premiums continued to be paid, and following his death, the cover remains in place for the surviving partner for the rest of the 300-year term, without the need for any further premiums to be paid.
Mr Mathias said: “I hadn’t completely appreciated the value attached to the waiver on death provision, which is now providing a young widow with serious health cover without charge. This is a great service we offer and as advisers it is important that we make the time to fully grasp the features on offer.”
2. Guaranteed insurability.
Guaranteed insurability options (GIOs) allow changes to be made to the value of the sum assured without the need for additional underwriting or a new policy. Typical scenarios where cover can be increased includes getting married or divorced, having a child, an increase in salary or moving house.
For a business, it includes a change in the value of a business loan or the value of a key person within the business.
Alan Lakey, director of CI Expert is a firm advocate of GIOs. “I am currently assisting a business where the joint managing directors are increasing their insurance to £1,137,500 without evidence of health, up from the original £750,000 ten years ago.
