News Review: Protection


Families need more than mortgage protection


by Bonnie Burns, individual protection product and technical director, Legal & General


Full time working parents carry out almost £21,000 worth of work around the home a year if you tot up the cost of hiring someone to do the domestic duties. that’s about 50 hours of help around the home a week. recent Legal & general research to establish the value of a mum/parent and to assess household expenditure and finances illustrates the personal value a parent has, whether they work or not, and serves as an important reminder that mortgage cover alone is not enough. mortgage repayments typically account for less than half of take home pay with the majority covering living expenses such as food, utilities, council tax, and childcare. a cover shortfall of over 50% of income could be financially crippling if a parent becomes critically ill or dies. consider a couple that


both work and have two children at school as an example. if one of them dies, the mortgage may be covered if they have mortgage protection but the surviving parent and children may have to alter their lifestyles significantly in order to survive financially on one income. at such a difficult emotional time this can be a hard adjustment to make. the situation could be


a lot worse where there is a sole breadwinner in the home. if that parent dies or becomes critically ill chances are that even if the mortgage is paid off, his or her surviving family will lose their home because they won’t be able to afford to live in it.


“There is a range of


products that have been designed to meet the pro- tection needs of families... but it also presents an opportunity for advisers”


But it’s not just the


breadwinner that should be considered when reviewing protection needs. Stay at home parents


are often overlooked but are even more valuable than a working one around the home, doing over a staggering £31,500 worth of work if you include the cost of childcare at £143 per week. the recession has played


its part too and many parents have looked at ways to reduce their expenditure, including cutting back on valuable protection


and insurance cover. our research showed 63% have made changes to their daily lifestyle due to the recession and made bigger cutbacks on things like holidays and home improvements. Some 55% also think


the state would provide if a partner becomes unemployed or critically ill, when in fact state benefit falls woefully short of what most people would need to maintain their existing lifestyle.


Advisers can help this research highlights the worrying state of affairs for unprotected consumers but it also presents an opportunity for advisers to highlight the need for family protection to their customers. Just over half of people we surveyed had life insurance but only 14% had family income benefit. this figure has fallen from 20% in 2009. Whilst it’s always hard to


ask the “what if?” questions, research like this that shows the value of insurance. there is a range of products that have been designed to meet the protection needs of families. Family income benefit pays a monthly benefit in the event of death, terminal or critical illness and is easy to explain as customers can see how the monthly benefit amount equates to their monthly living expenses. it’s also a cost effective form of cover and not often available direct to the customer. critical illness cover pays


a lump sum if a parent dies or becomes critically ill and


with split sums assured it can be even more affordable as customers can choose different levels of cover to suit their needs. income protection benefit pays a monthly benefit in the event of illness or injury due to incapacity to help protect lost earnings. it’s also important to protect cover against the effects of inflation by choosing the indexation option. this ensures cover increases in line with inflation so that future rises in living costs are accounted for.


With claims payouts


for cic and iPB now typically well over 90% advisers can give customers valuable assurance that these protection policies will deliver, when the state probably won’t.


JOINT LIFE QUOTES


To show how affordable this cover can be, below are some example monthly premium quotes on a 25- year, joint life basis for two non-smoking parents aged 35 through Legal & General. • Family Income Benefit: £23.21 (monthly benefit of £1,500 payable on death or terminal illness) • Life & Critical Illness Cover: £38.05 (lump sum of £100,000 payable on death, £50,000 payable on critical illness) • Income Protection Benefit: £21.40 (monthly benefit of £1,500 payable on incapacity; 26 week deferred period; based on a single life).


mortgage introducer MAY 2011 17


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