More than two thirds of independent financial advisers have their own income protection cover, and almost 90% of them sell the product, according to new research from Norwich Union Healthcare.
More than two thirds of independent financial advisers have their own income protection cover, and almost 90% of them sell the product, according to new research from Norwich Union Healthcare.
But despite this vote of confidence from the experts, it is still taking much longer for the message to reach a wider audience – currently only 11% of the working population have any form of long term income protection*.
And according to independent financial advisers, the main reason for this is that people believe income protection is too expensive for them, especially if they are already paying out for life cover and pensions.
Nick Homer of Norwich Union Healthcare said: “The fact that so many independent financial advisers take out income protection for themselves is recognition that it should be seen as an essential rather than a nice-to-have.”
Income protection could mean the difference between keeping and losing their home for anyone who becomes unable to work through illness or injury.
And it is possible to reduce the cost in a number of ways. Income protection policies offer people a choice of deferred periods – that is, a period of time which will elapse between the claim being made and the benefit payments beginning. They may, for example, receive sick pay from their employer for three months, and therefore choose a deferred period of 13 weeks. The longer the deferred period, the lower the premium.
One option to reduce costs is to opt for a policy with a split deferred period, which allows people to cover essential outgoings in the short term, and then to increase cover to support their standard of living if the incapacity proves to be more long term.
For example, a 30-year-old non-smoking male office manager accepted on a standard risks basis for Norwich Union Healthcare’s SafeGuard income protection cover to the age of 60 would pay Ł48.30 per month for a monthly benefit of Ł1500 following a 4 week deferred period.
However, if he opted for Ł750 monthly benefit after the initial 4 week deferred period, to continue for 13 weeks, rising to Ł1500 per month after that if he was still claiming, the premium would be reduced to Ł36.38, saving Ł136 a year. (The initial premium rate is guaranteed for five years.)
"Income protection can obviously protect peoples’ income, but it is equally useful for protecting a specific financial commitment such as a mortgage," said Nick Homer.
"Taking this type of approach not only reduces the cost, but can also help people to understand more clearly the benefits of having income protection."
* ABI statistics 1998
For more information on SafeGuard income protection, readers can call 0800 400 123.
Notes to Editors:
- 150 IFAs across the UK took part in the survey, carried out by QRS Market Research Ltd on behalf on Norwich Union healthcare
- Norwich Union Healthcare was founded in 1990 as the healthcare arm of Norwich Union and now provides a range of income protection and private medical insurance products to around 600,000 customers. It is one of the largest providers of income protection and private medical insurance in the UK.
- CGU and Norwich Union merged on 30 May 2000 to create CGNU plc - the world’s 6th largest insurer, the UK's largest insurance group and one of the top-five life insurers in Europe with substantial positions in other markets around the world.
CGNU's principal business activities are long-term savings, general insurance and asset management with worldwide premium income and retail investment sales of Ł26 billion and assets under management of more than Ł200 billion.
From October, the combined life and pensions, general insurance and retail fund businesses in the UK will operate under the Norwich Union brand, while the institutional business will operate under the Morley Fund Management brand.