The protection of ourselves and our loved ones against major physical, emotional, and financial hardship is something we could all agree on. However, when it comes to talking about its impact, and considering what we are prepared to do about it; for many, it is something we have kicked down the road a few times in the past.
We probably all know someone who has been affected by Covid-19 over the last few years.
Whether that be a change to employment, ill health, or the loss of a loved one. All of which can affect one’s financial security leading to difficulties in meeting mortgage or rent payments, putting food on the table, or payment of bills.
Due to Covid-19 being a national crisis, the government stepped in with a package of financial measures to help those affected, however, for many they only received a proportion of their regular income, and for those less fortunate, they didn’t qualify for any help, having to find alternative ways to get by. The word unprecedented has become all too familiar and the government’s help was just that. A one-off, given the situation, unlikely to be seen again in our lifetime. This just highlights how quickly our lives can be turned upside down and the importance of having some protection cover in place in case of the unexpected. Although we hope never to use it, we do need protection.
So why do many people still have insufficient protection to replace lost income. A survey carried out by Dewbury questioned consumers on this very matter. The main reasons were lack of trust in insurance companies to settle claims, the belief that it is too expensive, or they were unable to obtain cover.
Let’s look at this closer.
1. According to the Association of British Insurers (ABI), ‘98% of all claims were paid during Covid-19. They highlighted that £202 million was paid by insurers in 2020 to help the families of those who were tragically affected by Covid-19’. The main reason for claims being declined was non-disclosure.
2. Is protection really unaffordable? If there is a belief individuals would struggle to pay the premium now, this is nothing compared to the struggle to survive many would be confronted with if they were to suddenly find themselves with a loss of income. Many people incorrectly believe that the state will look after them. In reality, this is not true and comes as a shock to many in a time of need.
3. Many consumers only appreciate the importance of protection once they need it, often too late to then obtain cover at a reasonable cost due to their medical history or age. We need to emphasise the importance of applying for protection whilst fit and healthy.
Based on current rates, £100,000 life cover for a 35-year-old non-smoker over 20 years costs about £6 per month. For income protection, someone aged 35 earning £30,000 gross per annum could affect a policy paying £1,500 per month for around £18 per month. A small price to pay!
Since Covid-19, a survey carried out by LV= reported that ‘8.3m (48%) of 25–44-year-olds with no IP cover have become interested in taking out income protection insurance’. Furthermore, according to a report by Hymans Robertson, published in Money Marketing, ‘more than a third of people (39%) are more likely to buy protection insurance because of their experience during the pandemic’.
We probably all know someone affected by Covid-19 and the financial consequences this can have. Having something happen ‘so close to home’, is now not the ideal time to talk to us about protection?