There are some common misconceptions clients might have when determining what protection is right for them.
I am going to talk you through six common mistakes people make when deciding on whether to take out protection, how the right advice will clarify what your needs are and help you make the right decision.
If you would like more information on the different types of protection and how they work, please click here for a detailed overview on our website.
Reason 1: I don’t need it
The biggest mistake people make when addressing their protection needs is not recognising the need for it. If someone doesn’t have a mortgage, or if someone doesn’t have any children, often the thought process is “I don’t need it right now”. However, these people would be wrong. Even if you do not have these commitments or responsibilities, you still have a lifestyle to pay for, right?
The appetite for insurance exists in everyone, whether it is car insurance, pet insurance, buildings insurance, the list goes on – people know that covering themselves for the unknown is worthwhile.
If you have a phone insurance covering a relatively low value asset, why would you not cover your income? If you were unable to work due to illness, and you had limited sick pay with your employer, you would still need an income to survive regardless of whether you have a mortgage payment or not.
Reason 2: Employee Benefits
Whether you receive any employee benefits or not is a determinant of what cover is right for you. Being in a fortunate position where the company you currently work for offer you a good level of cover as part of your package does not mean that you do not need to look at your protection needs independently.
Employee benefits such as Death in Service (which is an employer-linked life cover) or long term sick pay can help steer the recommendation you receive from an adviser, but does not diminish the need for the advice.
Depending on what benefits you receive, there can be certain limitations to the cover. It might not be covering enough of what you need it to – for example the Death in Service might protect you for two multiples of your annual salary and not the full balance of the mortgage you may have.
Alongside this, because it is linked to your employer at the time, it is not a guaranteed long term cover and could essentially change overnight.
Many clients often take out cover to complement their work benefits when is it insufficient for their needs. For those with very limited cover, we would always recommend addressing protection in full, separate to their employee benefits.
Reason 3: Price
Your budget is a very important part of your protection planning and the recommendation you receive from the adviser.
A question you may have is “how much is it going to cost me, and can I afford it?”… The real question here is can you afford not to have it? As advisers, it is our job to find an affordable option for you that fits within your budget, but also is actually sufficient for your needs.
The price for protection should not be the obstacle that is stopping you from arranging cover. There are so many options available in the market to suit all budgets – short term options, discounted premiums, low start plans – which means that there should be an affordable cover for everyone. Through speaking to an adviser, you will get a full understanding of both your options and of course, what you get for your money.
The cost of life cover and other protection is often much cheaper than you may think. You can try out our life insurance cost estimator and see for yourself.
Reason 4: Health
If you are in a good bill of health, you haven’t really ever had any medical problems and your family history is pretty clean… fantastic!
This should mean that when you set up your protection, you will not be met with illness exclusions or higher premiums due to the increased risk. The fact that your health is good is not a reason to not arrange protection, it is in fact a reason to arrange it, and arrange it quickly.
As humans, we are not indestructible or immortal. No matter how conscious we are of our health, no matter how much we look after ourselves by exercising, eating well, meditating etc. we can never be fully in control of what is round the corner.
Protection is best arranged with foresight and not in hindsight. If you wait until you have a health scare to decide that cover is important, it might be more difficult for you to get the cover you need, it could be more expensive, or even – worst case scenario – it might not be available to you anymore.
Reason 5: Age
You are never too young to take out protection. This also links back to the previous point we looked at with regards to health. The best time to arrange protection is sooner rather than later. The younger you are, the better the premium you lock into and the less you likely pay in the long run.
Reason 6: Family support
If you are in need of financial support and you can rely on your family to help you, you might then think that protection isn’t necessarily right for you.
Whilst family support is there for you to fall back on, how long are you willing to rely on this? How long will it be until your parents/siblings/grandparents etc can no longer afford to pay for your mortgage or your rent and bills?
Family support should be considered as a short term measure, whereas addressing your protection needs with an adviser will look at your longer term needs and the bigger picture – especially when it is related to a mortgage or family protection.
There are many more reasons why someone might decide they do not need protection, and in most cases it is the wrong decision.
If this is you, the best thing to do is speak to a protection adviser before reaching a conclusion, as we can help you make a fully informed decision based on your circumstances.
If would like to arrange an appointment to discuss your protection needs, or if you have any queries on protection, you can email me at Chelsea.Warren@alexanderhall.co.uk. Alternatively, use the ‘Contact Us’ page on our website by clicking here.
Chelsea Warren is protection adviser at Alexander Hall
