Living Your Life in Peace - Not in Pieces

Granted, it's a bit of a harsh heading to start this piece, isn’t it?

• I know one person who has died from coronavirus - he was one year old than me and an old friend from school. He was married with children
• ?I know one person who is survived recently from a heart attack - He’s my best friend and is safely back at home after just three days. He is married with children
• I know one person who died from cancer at the age of just 30 - She was my sister

This is nothing uncommon as we are all aware of people who have become ill or passed away - that’s life! And yet it’s all too common that people don’t have adequate levels of protection for themselves or indeed, their families or their businesses.

The inevitable will happen to us all and everyone that we know at some stage or another.

I liken the life insurance industry to Disney! Let me explain - Just as there is an endless supply of children, including all of us at some stage, to watch Bambi, the Jungle Book, Frozen, and Cinderella, to name a few there is also literally an endless supply of those seeking protection.

Unlike the exciting investment world client does not need to be sold the concept because they know it’s a moral obligation to have protection in place just as they would be putting a roof on their house. However, they need to be sure that they are running with the most appropriate plan.

It’s very easy to overlook protection because unlike the investment world, let’s be frank, it’s dull!

Nevertheless, dull is good, if it can completely counteract a financial catastrophe in the future and at the same time return premiums with growth on top. Sounds good?

Creating a plan "of sorts" becomes an absolute must and moral obligation and simply offloads the extreme cost and financial burden to organisations far larger who can guide those behind through unsteady waters. Tiptoeing around the inevitable only as risk and potential disaster!

Now that we've got that out of the way, what do I mean by "creating a plan of sorts"?

Importantly where life insurance and critical illness insurance are covered clients need to be with the biggest and the best. We don't want a “Let’s hope so”, "might work" or "fingers crossed" solution. No - we want an organisation that was here before our grandparents were born and will outlive our grandchildren. We need certainty.

Simply put, when you are putting your client's lives on the line you can't cut corners and you must go with a leading gold standard organisation. More importantly, you don’t have to compromise because these solutions are available if you know where to look.

You need insurance companies that pay promptly because the best plan is the one that pays the most when you need it most. You or your loved ones don't want to be arguing the case to be paid, at the time of a claim, you want the money in the bank so that an element of normality can return as soon as possible for those left behind or those having to cope with a policyholder who is now critically ill and unable to financially contribute towards the family.

The type of plan is also key. Granted, term insurance is fantastic, and I have a policy myself sitting alongside my mortgage - I am a huge advocate for term insurance. It's inexpensive and provides surety for my debt to be paid if something happens before the loan is finished. But that's it!

There is no monetary value coming back to me or any element of growth added to which there is no flexibility. I’m kidding myself I think I’m going to make any money-I’m not-I just know that my family won’t be bothered by the bank, albeit contractually correct, will appear to be heartlessly seeking their balance of the debt in the event of my death.

Plans that accommodate growth come in many shapes and sizes, often very well marketed and positioned with nice shiny brochures and the promise of future financial gain. However this is often is linked and what’s more, reliant upon global market conditions which add risk, particularly during bearish markets.

In this instance, the adviser, or the clients must decide which funds they should get into to provide the growth. Easier said than done because if you get it the wrong insurance company will come back years down the line asking for more money or alternatively informing the client at the level of cover must reduce-that may not be a welcome visit!

So, much better, I would argue, to have the growth tracking, rather than investing into, specific indices with a proven track record. For example, The S&P500 was launched 65 years ago and has since delivered an average annual performance north of 7%. Over the last 25 years, we’ve seen an average growth rate of 5.87%.

Permanent Life plans (or high-value life insurance) are aimed at high-net-worth individuals and in many cases seek to preserve wealth rather than create it.

With the certainty in most cases of capturing the upside of what the market is achieving but protecting the client from any downside, simply with underlying guarantees in place from the outset. This is a win-win solution because it allows participation in the markets without the downside risk. What’s not to like?

They also provide certainty in the form of guaranteed premiums with virtually no likelihood of any premium changes further down the line.

Such plans provide growth by tracking indices rather than allowing clients or their respective advisers to manage funds. That saves time, worry, and effort because neither must select, monitor, rebalance or worse still, explain why funds haven’t performed!

Separate to this, let’s take a moment to look at the concept of critical illness.

When I was a lad (in the days of the Ark) the mere mention of “cancer” was a death sentence, whereas today more and more people are surviving so with this, plans have also evolved significantly.

As with life cover, critical illness cover transfers the financial responsibility and burden from a family to a larger organisation with deeper pockets which essentially is the concept of insurance. As above, it doesn’t have to be dead money and in a similar way, growth can take place providing value in the future and cover straight away.

What if:

1.???Premiums were guaranteed

2.???Growth rates were not linked directly to investment markets i.e. No downside.

3.???No monitoring or rebalancing was necessary because there were no actual investments being held to trade.

4.???In future years premiums could be recouped with additional growth as well.

5.???Dealing with the biggest and the best organisations to de-risk the proposition

6.???Widely available throughout the World

Suddenly Life Insurance & Critical Illness Cover - doesn't sound quite so dull after all, does it?