Peter Dunn, Head of Intermediary Relationships at specialist insurer Dentists’ Provident, looks at the importance of maintaining income protection insurance in financially challenging times.
With UK households facing cost of-living challenges, some may be tempted to consider cancelling their income protection insurance. However, during a period of economic uncertainty, and with pressure on welfare budgets and other public services, keeping these policies is of more importance than ever.
At least 25% of those under 54 either have no savings or are in debt, figures from the Office of National Statistics (ONS) show. Around 44% of young people in the UK aged 23-34 and a third of 34–44-year-olds, have less than £500 in savings. With the current cost of living crisis, this would only last the average household around a week.
With more than 150 million working days lost in the UK due to sickness absence in 2021, and with only 6% of adults in the UK holding income protection, the Income Protection Task Force (IPTF) ran a successful awareness campaign last month, highlighting the importance of income protection insurance.
Understanding the importance of income protection policies
During this year’s Income Protection Awareness Week, held between 17-22 October, over a thousand people – including financial and specialist advisors – dialled into webinars to learn more about the benefits of income protection insurance, showing renewed interest in this often undersold product.
Before joining Dentists’ Provident, a leading income protection provider for dental professionals, I was an IFA for more than three decades and saw first-hand the value of income protection for my clients. Income protection has been at the front and centre of my clients’ protection suite, as a product directly addressing the need for long term security if the worst were to happen.
Keeping communications open and proactive
In a more stable economic environment, annual or half yearly reviews of your clients’ affairs may have been enough, but in these volatile and financially pressured times, your clients may need greater advice and support. By pro-active engagement, you will not only pre-empt changes to their financial circumstances, but also provide timely support and reassurance regarding their financial plans and the products they hold.
So, what should your clients be thinking about?
Speak to the insurers before doing anything.
There are many alternatives to simply cancelling. Many income protection products are designed to allow you and your clients to adapt them to changing financial circumstances. Further, financial institutions are keen to work with their customers to produce good outcomes, so engagement and not a knee-jerk response, is the answer.
Consider the impact of unexpected illness on their long-term financial plans and quality of life.
Loss of income because of an illness or injury can wreak havoc with your clients’ financial plans. Accessing long term investments early, especially in a bear market, to meet unexpected cashflow needs, can have serious implications on your clients. For example, when they can retire and how comfortable that retirement will be. Reassessing the level and features of their income protection policy may be a more prudent and cost-effective alternative.
Future recovery in their finances may not necessarily mean they can reinstate the same cover at a later date.
None of us are immune from age or declining health. If your clients have long standing protection plans, cancellation may mean they cannot obtain the same cover in the future. Short term savings in premiums may mean an even greater longer-term cost.
The cost of cancelling cover
Sadly, I have personally witnessed the cost of premature action in my career as an IFA. I recall being called by a potential new client some years ago, who had sadly contracted a terminal condition. This devastating news was made worse because three months earlier they had cancelled all their income protection plans, following a conversation with a friend who’d previously done the same and was at that time enjoying the benefits of the premium savings. As a result, my client was forced to sell their business prematurely and the family faced severe financial hardship and stress at a time when their focus should have been elsewhere.
Life is never predictable.
About Dentists’ Provident
Dentists’ Provident is a leading provider of income protection insurance for dental professionals. Since 1908 our sole objective has been helping them achieve financial security during periods of illness or injury.
We are proud to be a member owned mutual focused exclusively on the dental profession. You remain at the very heart of everything we do and, most importantly, the reason we do it.
We are there when our members need us, from university to retirement and beyond.
For more information visit www.dentistsprovident.co.uk
To find out more about how we can help your clients, contact Peter Dunn or his team on 020 7400 5710 or email@example.com
The views expressed in this article are for information only and of the contributors only. Dentists’ Provident, the authors and copyright owners are not responsible for any reliance you place on the information contained above or for any published errors. Dentists’ Provident does not always exercise editorial control over material produced or reproduced in third party publications and/or websites and no responsibility is assumed for such material
 ONS, Financial Wealth, January 2022
 ONS, Family Spending in the UK, April 2020 to March 2022
 Financial lives survey 2020 page 60/222