Highlighting the importance of protection insurance can be a difficult conversation to have with clients who are currently battling the rising cost of living and the volatile market.
Indeed, consumer prices, as measured by the Consumer Prices Index, were 10.1% higher in September 2022 than they were a year before.
Many clients will be looking for ways to reduce their monthly outgoings and will start by cutting down on non-essentials. Research by Retail Economics highlights that British shoppers are expected to spend £4.4bn less on non-essentials this year than they spent in 2021 — a fall of 22% — in an effort to save money.
It is vital that clients make educated and informed decisions
Financial security
One of the many items consumers may look to cut is protection insurance. However, it can be argued that, in such times of economic uncertainty, future financial security is just as important as cutting back in the moment.
It goes without saying that purchasing a property is often the biggest financial decision we make, and even a temporary or small drop in income can have an impact on our ability to pay off a mortgage. However, according to The Exeter, a fifth (18%) of UK workers said they did not see the need for insurance products such as income protection as the cost-of-living crisis impacted household finances.
The study also found that, despite 43% of working-age adults worrying about loss of income due to personal illness or injury, only 17% had, or were in the process of applying for, an income protection policy.
Reminding clients of the purpose of their cover will be useful
When financial stresses push clients into cutting back expenses, there may be occasions where reducing, or even cancelling, protection might be considered. However, this can’t be a rushed decision, and framing client conversations and reminding them of the value and purpose of their cover will be beneficial in the longer term.
The argument remains: protection insurance is of the utmost importance for consumers in this modern age because it helps provide peace of mind that their biggest monthly outgoing, their mortgage, can be paid if they are unable to work.
Impact of Covid
The Covid-19 pandemic served to drive home the importance of protection insurance. The virus had a significant impact on mortality rates worldwide; in 2021 a study showed that the pandemic had caused the biggest drop in life expectancy since the Second World War.
Future financial security is just as important as cutting back in the moment
With the probability of similar viral outbreaks rising, this further highlights the need for brokers to have the discussion with their clients about protection insurance and its significance. This conversation is an integral part of the mortgage application process.
Objections and adjustments
People may object to purchasing income protection insurance on the basis that they receive sick pay from work. However, this often lasts for only a set number of days and can differ according to length of service and other benefits.
The reality is that, while many UK workers are not entitled to sick pay at all, even for those that are it will usually be insufficient to meet their regular outgoings for an extended period.
The Covid-19 pandemic served to drive home the importance of protection insurance
When it comes to protection, it is vital that clients make educated and informed decisions. It is here that brokers can provide tailored advice to consumers who may be thinking about cutting or reducing their protection cover, and can highlight some of the arguments as to why they need it for long-term financial security.
Overall, brokers hold the knowledge to help clients not only navigate a complex and changing mortgage market, but also continue to be able to pay the mort-gage in the event of significant health or lifestyle impacts on their overall financial stability.
Toni Smith is chief operating officer of Primis
