IT’S TIME TO GET ‘ON THE FRONT FOOT’

Against the backdrop of rising prices, the financial implications of a loss of household income due to death or illness are even greater.

With inflation hitting family essentials like food and energy hardest, savings will deplete sooner, and debt will build up faster. Arguably, protection has never been more vital.

Greater awareness of the damage inflation can do to spending power will make clients in strong financial positions more receptive to the value of increasing cover.

For many, level cover has always been the default. However current inflation pressures create an environment for increasing cover to really shine.

Rising mortgage rates have slowed the housing market resulting in a shift in mortgage business from new purchases to remortgaging.

Remortgaging requires a fact-find which enables advisers to reaffirm the value of protection and create the opportunity to offset falls in new mortgages with increased protection sales.

With rising interest rates driving a move to longer-term fixed rates mortgages, advisers can no longer rely on short-term renewals to be the catalyst for regular client contact.

Protection can form the basis of annual reviews, giving advisers the opportunity to highlight the benefits of cover, make sure existing cover keeps pace with their lives, and keeping clients close.

The rising cost of living may tempt some clients to cancel policies and insure themselves again in future. So, it’s important to point out that premiums rise with age so new cover in the future will be more expensive.

Also, any changes to personal health, can mean increased premiums later down the line, exclusions to cover, or in some cases they might not be able to get cover at all.

The value of a protection policy is only truly understood when a client makes a claim. So, for many the benefits remain intangible, increasing the risk of cancellation when income is squeezed.

However, many policies now offer additional services such as access to a GP 24/7 and second medical opinions which are free to use anytime. With the health service now stretched these added value services are in themselves good reasons to keep policies in place.

It’s easy to assume that given the cost-of-living crisis clients will be unwilling to take on the additional cost of a protection policy. However, once explained, the value of protection is hard to dispute.

In today’s climate, the cover a client needs may be different from the cover they can afford. Help them identify a realistic protection budget and work with it. Remember the cost-of-living crisis won’t last forever, so your client may well be receptive to increasing cover at a later date.

Fear of the rising cost of living could cause clients to cancel a protection policy without proper consideration.

The best chance of saving a policy is if you act within hours or days of a cancellation. So, ask every provider to notify you immediately if a client misses a payment or cancels a direct debit. A little timely advice can prevent clients from making regrettable decisions.

When clients are forced to budget it’s easy for them to overlook the value of their protection plan in favour of a Sky or Netflix subscription.

By offering to help clients budget you can help them get their priorities right. The potential consequences of cancelling a protection plan far out way the consequences of cancelling Netflix.

If a client is set on canceling a policy recommend ways to reduce premiums. The obvious place to start is by looking at the cover amount and policy term. However, with Income Protection switching from a full payment period to a short payment period is always an option, as is extending deferred periods.

And clients with increasing policies may be able to defer the annual cover escalation and associated premium increase. At Guardian we allow customers to do this for up to 2 consecutive years.

Reducing cover to reduce premiums is far from ideal, but as we all know some cover is always better than none.