The myths and misconceptions of protection: part 4
Robert Betts, Market Development Manager at Legal & General, discusses why advisers are ideally placed to help clients understand the benefits of a combination of both savings and insurance.
Legal & General’s recent Deadline to Breadline report revealed 6 common myths and misconceptions around protection. In our previous blog we looked at the common perception that income protection is too expensive. In this post, we look at how you can help your clients understand that savings alone won’t save them.
‘I can rely on my savings’
I am sure we have heard this many times as a response when asking clients how they would manage if their income stopped. But how often do we question this further?
Our Deadline to Breadline research highlighted that almost 40% of respondents say they would rely on their savings if they became seriously ill or injured.
The research revealed the UK average monthly spending on basics and essentials was £2,589 per month – around £89 per day.
Deadline to Breadline revealed that to feel financially secure, people would want to have £12,200 in savings. Using the data from the research, based on average monthly savings, this could take at least 5 years to achieve. Once achieved, how long would it take for most people’s savings to run out based on average monthly spending? Not long – on average the UK deadline is just 24 days before savings run out and they would need to rely on others.
Remind your clients of the real reason for savings
Usually, savings are made to allow us to purchase or improve something where the cost is immediately prohibitive, such as buying a car, going on holiday or fitting a new kitchen or bathroom. Savings are not often made in order to support us in a time of need.
Once the purpose of savings has been identified, what questions could you ask your clients to establish how much of their savings has been earmarked as their emergency fund? Have they even considered it?
By exploring a client’s plans for their savings, identifying the need for an emergency fund and providing affordable insurance in lieu of one, an adviser can tailor the benefits. Whether that’s for life insurance, critical illness cover or income protection, you can tailor it so it falls within your client’s budget, protect them up to retirement and help them maintain their savings for the purpose they had imagined.
We don’t recommend or advise for protection to change a person’s life, we recommend and advise for protection in case their life changes.
Advisers are ideally placed to help clients understand the benefits of a combination of both savings and insurance. After all, protection can give an immediate safety net, while savings are building over time. However, it’s your client’s decision to make once they are in a more informed position thanks to their adviser.
Read the full Deadline to Breadline (2020) report below: