Pinning its colours firmly to the mast protection provider Bright Grey has pitched its view of the demise of CI offerings by noting it may not be such a bad outcome after all.
That is because CI cover on its own may never be enough to protect people against the loss of income in cases of ill health, Bright Grey (BG) says.
If it is sufficient funds to live on that is the goal, then consumers need to aquire more income protection rather than CI cover, says Roger Edwards, products director at the Edinburgh-based company.
His argument is based on comparing the ongoing income received from a revenue generating investment made with the proceeds of a CI policy against the payments that would come from an IP policy.
For example, an individual paid the average lump sum of £74,000 from a CI policy would probably only be able to generate income of £9,000 annually for his or her dependents - based on an investment return of 4.04% net of tax - spread over a 10-year period, Edwards explains.
Over a 25-year period the annual income would work out at some £4,600, according to Edwards' example.
Even a £250,000 lump sum paid out on a CI policy - which is almost three-and-half times more than the average CI payout - would only be able to generate some £15,700 annually over the 25-year period, Edwards adds.
With the CI market going through a major overhaul, BG believes it is time for IFAs to re-think what kind of protection that will be best for their clients.
Although income protection has experienced criticism in the past, BG now wants to help advisers to expel the 'myth' the cover removes certain benefits or waivers and is seen as an overall complex product.
"It's about time we sold more income protection," Edwards concludes.IFAonline
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