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Protection Watch: The price of happiness and clarity on benefits

Protection Review chief executive Kevin Carr looks at recent market events

DWP clarity on benefits and protection insurance

Earlier this year, the government clarified that income from an insurance policy specifically to cover mortgage payments would not be counted when assessing entitlement to means-tested benefits. This is relevant to protection advisers, especially those arranging mortgage protection, and we have now had this confirmed by the Department for Work and Pensions.

Income Protection Taskforce head of government and regulatory affairs Richard Walsh has issued further guidance for advisers on the implications in respect of life and critical illness cover. He says: “At a high level, the universal credit legislation states that if a person uses their capital to pay off or reduce a debt, including a mortgage, this will not be treated as depriving themselves of that capital and not taken into account in the assessment of their entitlement to UC. So it is now essential that advisers check at claim stage whether a client is in an area where UC has gone live, to check they qualify.”

Many people are also entitled to claim non-means-tested bereavement benefits, in addition to any family income benefit, term or life payments.

This is a marked improvement on the arrangements for the outgoing working age legacy benefits. It shows that the new benefits system being rolled out will allow people to use insurance payouts to reduce or pay off their mortgage or any other debts.

Advisers should review, at the point of claim, whether their client is based in an area where UC has gone live and if the client is in receipt of a legacy benefit.

Only claimants of UC, state pension credit and housing benefit for people over the qualifying age for state pension credit can benefit from the DWP clarification.

Can we put a price on happiness?

How much pay might we give up in return for a more balanced life? That is one of the questions asked by LifeSearch in its latest Health, Wealth and Happiness report.

Most of us would be theoretically willing to sacrifice some of our pay if it made us happier, and around half of us would happily give up a 5-10 per cent chunk of our salary.

That is the equivalent of £2,000 if you consider the average UK salary of £25,417.

The report also found 44 per cent  of employees feel like they work too hard, 10 per cent higher than last year. Millennials report the highest levels of working stress, at 46 per cent, compared with just 4 per cent of baby-boomers.

LifeSearch chief executive Tom Baigrie says: “After marrying up the findings on what people say makes them happy and unhappy with how people say they protect themselves and their families against the catastrophe of losing their income through disability or death, we’ve identified what we’re calling the ‘catastrophe life cover gap’.

“This is where a person’s situation shows that having life cover in place would be good for their peace of mind, but they have not protected themselves in this way.”

Also on the radar…

  • A recent case study in the Mail on Sunday highlighted how important income protection can be. It saw Gavin Knocker explain how his cover helped his family by easing financial pressures before eventually losing his wife to cancer. He was able to benefit by claiming with British Friendly, meaning he could focus on caring for the family, rather than going to work. Let us hope case studies like these prompt more people to consider putting cover in place.

  • As part of a new behavioural change study showing the impact of wearable technology on physical activity, Vitality has pledged to make people 20 per cent more active by 2025. Its report, which found activity levels for participants using Vitality Active Rewards rose by an average 34 per cent compared with those without incentives, has compelled the insurer to commit to making 100 million people more active by 2025.

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