Jennifer Gilchrist highlights some questions to ask younger clients convinced they do not need protection insurance.
Most people will ask themselves the ‘what if’ question at some point in their lives. What if I had worked harder at school? What if I had gone to university? It is easy to look back and think what might have been and how differently life could have turned out.
But how many people ask themselves the same question about the future? What if I became seriously ill? What if I died prematurely? How would my family cope financially? Depressing thoughts, yes, but these are exactly the type of conversations people need to have to ensure they are equipped to deal with life’s unexpected events.
With the average age of a first-time buyer now increasing, advising younger people to take out protection before they step onto the housing ladder makes sense. After all, it is not just homeowners who will suffer financially should their income stop.
How to coax younger clients into protection
Everyone’s lifestyle and future plans are dependent on maintaining a certain level of income throughout their working life. Any loss to that income will have a detrimental effect on those aspirations.
While life insurance may not be as appropriate for someone who does not have a mortgage or dependents, critical illness cover or income protection is. The benefits of flexible menu plans mean the amount of cover can be increased or more covers added whenever circumstances change. This also gives advisers the opportunity to revisit clients’ needs and help to build long-lasting relationships.
Encouraging younger people to take out protection insurance will be challenging but there are convincing arguments for doing so. What would the loss of their income mean to them? What aspect of their lives would they be willing to give up?
Meanwhile, if they understand that the younger they start a policy the cheaper it is, they might be more inclined to see the benefits. For example, for a 25-year-old non-smoker, earning an average salary of £25,000 and looking to cover 50% of their earnings, the monthly premiums for an income protection product could be as little as just over £10 a month. At age 35, the premiums rise to around £18.
Of course, everyone has different priorities and, while a 25-year-old could have the attitude that life cover or income protection is for older people, there is no harm in getting them to think for a minute about the implications of not having cover in place.
They may not have children or a mortgage but, if they suffered a serious illness or accident and were unable to work, they will still suffer the same financial hardships as a homeowner.
If we can start to encourage people to recognise the value of having a financial safety net in place as soon as they start earning money, they will be less likely to be asking the financial ‘what if’ question later in life.
Ultimately, whether someone is single or has a family, are renting or own their own property, if they are no longer able to work and earn an income each month, many people would struggle to make ends meet.
Jennifer Gilchrist is senior product development manager at Scottish Provident
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