The myths and misconceptions of protection: part 1

27 July 2021

Robert Betts, Market Development Manager at Legal & General, discusses the most common reason clients give for not having income protection, and how you can help to reframe their perception.

In the first article in this series, we introduced how Legal & General’s recent Deadline to Breadline report revealed 6 common myths and misconceptions around protection. In this post we look at the most common reason people give for avoiding income protection, as revealed in our research.

 ‘I have no need to protect my income’

One of the biggest myths revealed in the research, stated by 31% of the respondents was, “I have no need to protect my income”. It seems quite a sweeping statement and suggests people probably haven’t ever thought about it.

This view should not stop the protection conversation, but instead provide an opportunity to ask further questions and reveal the true feelings and thoughts that drove the client to that response. Once the thought behind the answer has been brought out into the open and discussed, you have the opportunity to bust the myth by working with the client to find a real-life solution that suits their situation.

By understanding the common misconceptions that a client is likely to have, we can change our advice process and fact-finding approach to ensure that we answer it even before it is raised.

Building a risk profile

Our webinar, We all have a Plan A (but what’s your Plan B?) explores the need to assess a client’s risk profile and their capacity for loss. This is to help them understand the need to protect what is likely to be their biggest asset – their ability to earn an income. This is a technique that has been used in the wealth and pension arena for many years to great success.

If a client does not want to take a risk with investing their ISA in a hedge fund and instead favours the relative safety of a tracker or a government bond, why would they not want to  avoid or mitigate risks with their biggest asset, in case something happened? You can find out their capacity for loss by asking three simple questions:

  • What ability do you have to absorb the total loss or a fall in income?
  • Would it have an effect on your standard of living?
  • What risks are you able or want to take?

We all tend to insure what’s tangible – in other words “things” – but tangibility should not be our guiding value. Worth needs to be our measure, and our income has to be at the top of that list.         

Read the full Deadline to Breadline (2020) report