Let’s talk about… death!
Thinking about or talking about our own demise is something that we humans tend to avoid at all costs. Equally, we don’t like to think about what would happen were we to be diagnosed with a serious illness, or contracted a health problem that had a detrimental effect on our ability to work.
But in reality, we all know that we’re not immortal, and the statistics surrounding cancer, dementia and heart disease don’t paint the prettiest of pictures for the nation’s health, especially into older age.
Some clients don’t realise that just as important as generating wealth is the need to protect it. Financial planners or wealth advisers that are ‘Chartered’ are able to advise clients on the full range of insurances. Due to the nature of helping to look after clients and their needs in the event of unforeseen circumstances, the industry term used to describe the various insurances is ‘protection’.
Types of protection available
In brief, there are various terms you may hear in relation to protection products. To simplify the many options available, probably the easiest distinction is to divide these into policies that pay out upon death, and those that are designed to pay out during your lifetime.
Policies designed to pay out upon death include: Life insurance, mortgage protection, family cover.
The policies designed to pay out during a lifetime include: CIC – Critical illness cover, income protection, health insurance.
What do I need?
The type and level of insurance required comes down to the liabilities and risks you have in life and the level to which these need to be protected against. In an ideal world, we’d see that all clients had the gold standard of insurances and had every angle covered. However, the cost associated with various insurance products can soon amount to a significant sum.
When it comes to discussing protection with clients, we need to establish what’s most important, and work our way up from there.
One of the first considerations is whether or not there is a mortgage to pay and how this would be managed if you could no longer work, or passed away. Without any form of replacement income, paying your monthly mortgage instalment might quickly become difficult to afford.
This leads on to another of the main factors that we discuss in relation to protection – your personal circumstances and whether you have a spouse or dependents that rely on your income. If you were no longer able to work, or were not around to contribute to the household ‘pot’, would your spouse have the ability to continue to pay the mortgage alongside other costs?
The fact is that as we build and generate wealth, we tend to adjust our lifestyle and spending accordingly. Even if you don’t live in a lavish manner, everyday costs, as well as financial commitments such as living expenses, quickly add up. Selecting the right protection products comes down to how far you would be willing to go to compromise. Most people wouldn’t want to have to go to the extent of moving or selling their house should they no longer be able to work, nor would they want their family and/or spouse to have to move should they pass away. This is where we usually start with protection – ensuring that mortgage protection is in place in the form of life cover, with a corresponding level of CIC and/or income protection also in place.
Do you have existing policies in place?
Depending on your employment situation, it may be that you have some form of protection already in place. For example, many large organisations will have a ‘death in service’ benefit, designed to pay out to family members.
Due to the nature of our client base, some women we work with are entrepreneurs or are self-employed. Compared to women that work in the corporate world, our entrepreneurial clients don’t usually have the same insurances in place – and often therefore have a greater need for life insurance, health insurance and income protection policies.
Insurance products have several variables that can quickly become fairly complex. As part of our service to clients, assessing protection needs is part and parcel of what we do. Although many financial advisers will take a commission on insurance products, we have elected not to. This is because we want clients to be protected in the full knowledge that our advice is impartial, and is not driven or incentivised by any other factor.