How to find the right income protection insurance

Wednesday, 15th Sep 2010
Categories: Insurance, Newsletter


Three centuries ago, the original premise of life risk insurance was based on the assumption that an unexpected event, such as death would affect another party detrimentally. If no detriment to another party resulted from such an event, there was nothing to insure. Insurance is most definitely not designed to be a windfall, if it was, it would be classed as gambling.

Travel forward to today and nothing about that basic premise has changed. To compensate for the detrimental effect of an unforeseen event is still what insurance is all about. The available tools have changed however, such that advisers now have a plethora of products with which to work to solve the risk management issues of clients. But apart from the tools – products – which we use to craft protection packages, advisers can also offer clients their capacity to provide advice.

This, alas, is where the process is still falling down. It is all too often that the advice provided has been driven by just a few fact finding questions which have not adequately uncovered the totality of a client family’s detriment. Rather than asking “What are all the circumstances which would be of detriment within your whole family and business sphere if you were to die?” The common questions imply “What would happen to your spouse and children if you were to die?” This is not broad enough, if an adviser is to do a truly thorough job during the advice process.

If an architect were to construct a plan for a high-rise office building without considering the safety exits, the plan would be flawed and the building, if it went ahead, would not be appropriately catering to the risks which the building’s occupants may have to face. Planning for such a substantial project must employ breadth – and depth – of vision. This idea similarly applies to the “sphere of risk”. It simply widens the aperture over the client’s circumstances so that all detriment likely to result from an event is discovered and addressed in the advice given.

This is done by asking questions beyond the impact on just the spouse and children, it is finding out about any particular group of people who would be impacted if an event occurred, such as parents, adult children, ex-wife or ex-husband, disabled niece or cousin for whom the client is legal guardian, etc.

The lack of attention to the building safety exits would be easily noticed and rectified by the engineers and builders. With risk insurance however, the missed elements of advice and the subsequent plan are most likely to be noticed only when it comes time to claim. Like the fire in a building with no exits available, the client’s circumstances might well be in trouble at this point.

The risks which will pop up as ‘unplanned-for problems’ might be so familiar to the client that they don’t even think of them. These risks might sit at the edge of the adviser’s vision but are often shadowed by the ‘main game’ that is the risks and consequent needs of the immediate family. The adviser or client may never have thought of these peripheral risks during the advice process.

Unfortunately, many clients have not been provided a thorough advice process and this may only become evident at the worst time – a claim. Are you comfortable that you have catered for the appropriate safety exits?