Why IP should come first

Why IP should come first

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This month, IPTF have been highlighting the importance of making sure income protection is the foundation of financial planning, front and centre of conversations about protection. ?For too long, financial advice has centred around life insurance with the possibility of some critical illness cover for good measure. It’s time the advice process spoke to customer need, to the cover that they are most likely to use and use and to the requirements they have.

The recent Critical Thinking report by CIExpert showed that 22% of CIC claimants used their payout to replace their income with 20% saying that they used the money to cover everyday expenses compared to 19% who said they used it to pay of all or part of their mortgage.? When the unexpected happens, it’s clear that the primary concern of most people is to maintain the status quo which aligns perfectly with income protection. Do consumers prefer a lump sum? It’s impossible to say given how undersold income protection has been in the past with many advisers avoiding the most important of conversations. What we can say is that they prefer to keep paying their bills and given the average length of IP claims for those with long term cover, shared by a number of insurers, the need to ensure that income is protected long term is abundantly clear.

Why IP First?

An easy way to explain this is the safety announcement they give you before take-off on an aeroplane which reminds you that in the event of emergency you should secure your own lifejacket before attempting to assist anyone else.

The recent Reaching Resilience report from LV= for Advisers revealed just how likely it was that a person’s income was supporting people in addition to them with the average worker’s income supporting 3 people and 10% of people supporting 5 or more people with their income.? ?The loss of an income unexpectedly at any point is significant but when you’re supporting other people, the impact is more keenly felt and the impact potentially more devastating.

If income stops, everything stops. Choices stop and difficult decisions must be made. Plans need to change. Everything starts with income and so should financial advice.

By securing a client’s income we are improving their financial resilience, reducing the chances that they will become financially vulnerable in the event of an income shock and securing a long-term relationship with them.? Without an income, their ability to pay premiums for any other products are in jeopardy and so too is your relationship as an adviser with them.

So it’s clear then that advice conversations must start with income, must secure a client’s income before moving on to other plans, but our message “IP First” doesn’t just refer to that first advice conversation which may take place relatively late into adult life given the average age of a first time buyer is increasing, as is the age at which people are starting families.

It’s a fact that income protection is easier to obtain the younger it is taken out so it’s vital that as an industry we explore new ways of reaching out to clients.? Numerous reports have recently highlighted that the appetite to protect their income exists with all sectors of the population but particularly amongst young workers and it’s not acceptable to blame these potential consumers for not buying our products when many don’t even know they exist. It’s time to reach out, to do what we can collectively to educate those joining the workforce on the possibilities that exist to achieve their financial goals. We know the next generation of customers will look for us in different places so let’s make sure we’re there to meet them and help them secure their incomes.