I’m Still Standing
Illness statistics can be kind of scary. Nobody likes to be told they personally have a 1 in X chance of being diagnosed with something nasty. So let’s talk about the positives instead...
Did you know?
- While 1 in 3 people will develop cancer during their lifetime, breast cancer survival rates have soared with almost 66% of women diagnosed now likely to survive for at least 20 years.
- Survival rates for men have improved in 93% of cancers examined.
- Survival rates for women have improved in 76% of cancers examined.
- Today it is estimated that over 1.2 million people are living following a heart attack.
- It’s estimated that 1.2 million people in the UK have survived a heart attack. For people under 65 years old death rates have fallen by 44% in the last ten years.
Sources: Bright Grey / Cancer Research UK / British Heart Foundation
But,
- Macmillan Cancer Research says that 77% of patients said that cancer had affected their financial stability.
- Swiss Re tell us that the UK has a £160bn Income Protection gap and that 57% of us have no form of Income Protection at all.
It ain’t necessarily so!
5 reasons why buying ‘something’ in protection may be no better than buying nothing at all.
1. Advice always adds value.
In theory, any consumer could out-perform their adviser in any financial services category. The consumer could pick a better mortgage, ISA, investment fund or bank account on their own. The truth is that which route was best cannot be proved until much further down the line.
Protection is different. It is provable that advice ALWAYS adds value because it is factual. Single life in trust is ALWAYS better value for money than joint-life not in trust. It is provable that FIB is better value for money for a family than LTA. It is provable that Income Protection is a better product than Payment Protection Insurance, and so on.
2. Why buy something unsuitable? Question: Would you rather buy something unsuitable than nothing at all? Answer: You might if you have money to burn, or if a more suitable product simply didn’t exist.
But we know that UK consumers do NOT have money to burn and more suitable products DO exist.
So for example, why do so few people buy Income Protection? Because hardly anyone sells it so hardly anyone ever tells consumers about it. IFAs know IP exists, so does the Consumer’s Association. But the majority of the public gain their financial services knowledge from the company they bank with and/or the company they borrow money from. If neither of these offers IP, the chances are they will never know it exists.
Does a single house-buyer with no dependants need life cover? No. So why waste money buying it? Why not stick it in the bank, a pension or an Income Protection policy?
3. Refunds of premiums. If ‘something unsuitable’ really is better than ‘nothing at all’, why does the ombudsman rule so many ‘refund of premium’ decisions? Surely it’s because the ombudsman deemed the contract unsuitable and ruled that the client should be returned to the position as if they had never purchased it.
4. Getting it right first time. Alas, consumers do not buy protection every week. In truth, they don’t even think about it every five years.
Protection is what the marketing men call ‘an event driven purchase’ - a decision to buy driven by a specific event such as marriage, a birth, a new mortgage or a change in career.
‘Don’t worry, they’ll get it right eventually’ some say. But what if their health changes before they happen to get it right? What if they die while thinking they’ve already got it right? If we are to genuinely help consumers and attempt to close the £2.2 trillion UK protection gap (or even halt its expansion) we need consumers to get their protection needs right first time. Because there might not be a second chance.
5. The protection consequence theory. Consider the financial services products available in the UK today: loans, ISAs, credit cards, mortgages, travel insurance, pet insurance, bank accounts, even pensions.
Now think about both the emotional and then financial consequences of making a buying mistake in each. If you make a mistake when buying any of these products or services the practical and financial consequences are relatively limited in all but the most extreme circumstances.
For example. You’re locked into the wrong fixed rate when you could have had a variable discount. You chose the XYZ ISA, which grew at 4% when the ABC tracker grew at 7.5%. or your bank account charges a fee when you could have had cash-back, and so on... Most importantly, once the buying mistake has been realised, you are free to switch and the error is rectified for the future.
Compare this with making a mistake in protection. A policy not paying out at all for example. Or a policy paying, but not the amount expected. The realisation that the pay out will only last a few years. Buying joint life cover instead of single life cover in trust. And there’s plenty more. The emotional consequences are significantly more sensitive as we are considering the death or serious illness of either yourself or a loved one. The financial consequences are vast as the sums assured in question are often several hundred thousand pounds – or 20 to 30 years of income.
And most importantly? In protection, when the mistake is realised it is too late to switch or turn back the clock because unfortunately you are already dead or seriously ill.
LifeSearch says... Why do so many people still buy just life insurance on its own? Some people need insurance for when they die. But in the modern world, many more need insurance for when they live.
Won’t get fooled again. Tips on how to save money if YOU don’t fit the box
- Don’t automatically choose the cheapest provider. The cheapest providers are often the ones that will treat you more harshly if you don’t fit their box.
- Don’t be put off completely if one company increases your premium. Try someone else instead as they are NOT all the same.
- Even better, get an independent adviser to do the job for you.
- Always be honest when completing your application form. If you are honest when you apply then any valid claim will be paid.
- Make sure you are happy with how much you can comfortably afford. Don’t over-stretch yourself.
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