"It’s critical to segment and focus protection conversations and advice on the circumstances and needs of the customer.”
Mr Yates stresses that there is a massive and growing protection need within this population and advisers need to be ready to provide the right advice at the right time.
He highlights some key questions that advisers should consider with their clients to help identify appropriate protection cover:
- Is it to cover later life earnings and debts (term and income protection)?
- Is it to help families manage final expenses (guaranteed whole of life)?
- Is it to protect assets and provide the next generation with greater financial security (IHT planning, whole of life plans, gift inter vivos, trusts)?
- Is it to help with the costs of a longer later life (new products such as Vitality’s dementia and frail care cover)?
Mr Carter adds that a friendly society form of nomination represents another option: a service offered on National Friendly’s guaranteed whole of life or later life insurance products. This is an expression of wish form that can free up to £5,000 from the policy proceeds without having to wait for wills or probate.
“This can be a valuable asset at a time of great need and upset,” he says.
So, considering there are no longer any traditional pre-funded long-term care products on the market (due to issues around longer lives and sustainability) what are the pros and cons of some of the later life protection options highlighted above?
Whole of life
Mr Carter says its guaranteed whole of life product is designed to offer competitive cover to those who may have medical conditions “and therefore the fact that more people are living longer in poorer health doesn’t affect the sustainability of the product”.
“One of the criticisms of this type of product is that you can pay in more than it pays out,” he adds.
“However, like any other insurance, any delay in claiming is surely a good thing?”
Alan Lakey, director at Highclere Financial Services, comments: “Whole of life is essential if IHT mitigation is the aim and also for those wanting a known payout to cover funeral costs.”
A big problem with whole of life for advisers though is understanding the amount of cover required, says Adam Higgs, head of research, adviser services, at Financial & Technology Research Centre.
“The older a client gets, the more expensive it will be to put cover in place, therefore it is beneficial to put such cover in place at a younger age, but at the same time at a younger age it’s also more difficult to understand the amount of cover the client will require,” he says.
“Having regular reviews with the client will be important to ensure the cover remains suitable.”
Mr Higgs adds that advisers need to consider how the plan is set up. For example, consider the impact of inflation on a level sum assured plan. He also says that the rate basis is vital.
“Plans set up with guaranteed rates will be more expensive at outset but cheaper in later life, while plans set up on a reviewable or renewable basis will see affordable premiums at outset but the costs increase significantly later in life,” he explains.
