Protection really is the starting point of everything that you do. It’s the first (and most important) area of financial planning. As an individual, a couple or as a family, we have a duty of care to protect our loved ones after we have gone.
The latest in our “Mythbusters” series comes from Mark Dobing, an Independent Financial Adviser at Active Financial Planners with more than 20 years’industry experience. Here, Mark looks at some of the commonly held myths about protection, and busts them!
Myth 1 – I’m too young
Not true! Anyone from age 18 can apply for a life insurance plan, and the younger you are, the less expensive it can be.
Vitality Life recorded that their youngest adult claim last year was for a tragically young) 19 year old. The death claim was paid due to severe traumatic head injuries following a road traffic accident (source Vitality Life 2017)
Although we neither want or expect to need to make a claim at such a young age, however if the worst happens, the cover can be vital to pay for unexpected funeral expenses and debts.
Myth 2 – I don’t need it “it won’t happen to me”
Not True! This is the main objection that I hear from clients. What I tell them is that the need for protection is indiscriminate, regardless of age, race or gender. The fact is that people do have accidents, become too ill to work and there are deaths, no matter how well they take care of themselves.
As you go through life, your circumstances change. For example, you might buy a house, have children, get married, or change jobs and your need for protection becomes greater. You are protecting yourself and your family in the event that anything happens to you, making sure those who are left behind aren’t struggling financially.
Myth 3 – I am already protected through my job
Maybe! Many clients already have protection such as death in service provided with their job. This is common in the public sector, or for those who work in larger corporate companies. This, however may be a modest amount, typically 4 times your annual salary. This may sound substantial, but the money may not last long. As an adviser, I regularly see that this would not be sufficient to pay off the mortgage, clear any debts you may have and provide for your loved ones after you have gone.
Myth 4 – It will never pay out
Not True! You can’t argue with the statistics!
In 2016:
- Legal & General paid 98.6% of all life claims and 56% of all critical illness claims (Source: Legal & General, April 2017)
- Vitality Life paid 93% of protection claims, including 99% of life insurance claims (Source: Vitality Life, 20/04/17)
- Aviva paid 96.7% of all individual protection claims and say “We want to pay as many claims as possible and with life insurance. Declining a claim is unusual.” (Source: Aviva, Spring 2017
- Aviva declined just 1% (164) of all life insurance and terminal illness benefit claims (Source: Aviva, Spring 2017)
Myth 5 – It’s too expensive
Not in all cases! There is no doubt this is a monthly commitment that nobody wants to have, but as an adviser, I see it an essential budgetary requirement. Protection is an intangible service therefore some people see it as too expensive. My role is to review your existing arrangements and make appropriate recommendations, based upon our objectives and monthly affordability.
The content of this blog is for information only and must not be considered as financial advice. We always recommend that you seek independent financial advice before making any financial decisions.
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