We are almost preconditioned to think the first and most important protection on a mortgage is immediate life cover – but are we missing a trick?
The old cliché that financial planning is about making provision for the effects of dying too soon (life cover) and living too long (pensions and investments) has never been more true than it is today. We tend to conveniently forget what may go wrong in between, such as ill health, unemployment or accident. We get into debt in line with our ability to service that debt, particularly with recent very low mortgage interest rates enabling us to buy more expensive houses, and credit cards and finance available almost at the drop of a hat if you have a reasonable job.
Stating the obvious, we have a lot more to lose if the unthinkable happens. Where then do we, or should we, start? Life cover? Unemployment cover? IP cover? Accident sickness unemployment? CI cover?
Should we start with life cover, as we traditionally have for many years? Life offices and reinsurers often use statistics to illustrate a sales point. A statistic commonly used for IP is that a man or woman aged 30 is ‘x’ or ‘y’ times more likely to have a period of at least six months off work before retirement age than die before that time.
You can prove anything with statistics but a moment’s thought about these figures will confirm that IP is a vital part of financial planning and should therefore come top of the protection list. After all, when incapacitating illness or accident strikes, IP funds all the bills, including life cover as in reality the majority of life cover is still written without waiver.
Where does that leave us? Realistically, we are not going to change the world. Life cover is and should remain vital but perhaps we may start to make life cover together with IP the twin pillars of our clients’ financial planning far more than we have in the past.