Purchasing a house is one of the key life stages that prompts people to consider taking out protection. But the UK’s resurgent housing market will not necessarily see more people protecting what matters most in their lives.
Life cover sales far outstrip those of any other form of protection. This is partly because it is the most well-known product but also because of the way it is often purchased: in conjunction with another financial product such as a mortgage or when someone’s financial circumstances change, such as when they gain dependents through birth or marriage.
Purchasing insurance of any kind removes a certain element of risk and when a client purchases life cover, they remove an element of financial risk from the lives of their loved ones. This is commendable but it ignores the greater risk to which many people are exposed: they are more likely to be unable to work for two months than to die before they reach retirement age.
We may not like to consider the prospect of long-term ill health but the reality is that it will befall a percentage of the population at some point in their lives. When we buy a new car or washing machine, we resign ourselves to the fact that it may break down and routinely take out insurance. But far too few of us have a back-up plan to address being unable to work.
Figures show that a third of people would dip into their savings to bridge an income gap. But of those, a quarter say their savings would last for only two months. Of those who say they could rely on their savings, just 10 per cent have enough put by to support themselves for more than a year. The conclusion must be that many people would be financially vulnerable if they were unable to work for an extended period.
To rectify this, we need to move the conversation around protection away from policies that protect things towards policies that protect people and their family’s lifestyle.
Advisers say a common barrier to selling protection is clients who say they have nothing to protect because they are single, do not have a family nor own a house. The strong link between house purchases and protection sales is no bad thing but there is a danger that the traditional dialogue may leave many feeling that none of the products are relevant or necessary for them.
Regardless of whether clients have a mortgage or dependents, it is usually their salary that enables them to afford their lifestyle. We must make them aware of both the risk to that lifestyle and the means to protect against it.
Mark Jones is head of protection at LV=