The myths and misconceptions of protection: part 5
Robert Betts, Market Development Manager at Legal & General, discusses the common notion that family and friends are a stable financial fallback, and how you can demonstrate the importance of protection with a Plan B strategy.
Legal & General’s recent Deadline to Breadline report revealed six common myths and misconceptions around protection. In our previous blog we looked at why savings can’t always be relied on as an immediate safety net. In this post we look at how you can help clients understand their own reality and highlight their potential need for cover.
I have a plan B (I could rely on others)
How many of us can hand on heart say that in the event of a loss of income we could, without doubt, call on others to support us? Would you even want to put someone in that difficult position where they may feel forced to do it, put into financial hardship, or be in the embarrassing situation of having them turn you down?
The bank of mum and dad prevails
Our Deadline to Breadline research PDF size: 8.7MB suggests that people think they can rely on their employer, the state or even their families if they lost their income. A whopping 9 out of 10 under 25’s say that they could rely on the financial support of their parents. Worryingly, this wasn’t unique to younger people, with nearly 80% of 45-54-year olds and nearly half of those aged 55-65 believing that the financial support of their parents was also an option for them.
But can this really be relied upon, and for how long? In our research, less than half of those who said they would rely on friends and family admitted that the financial support wouldn’t be long-term.
When it came to the support form an employer, just under 30% thought their employer would provide extended sick pay if they become seriously ill or injured.
The reality is that many people are unsure of the amount their employer will pay them or for how long. Nearly half believed they would continue to be paid for more than 3 months if they became sick. Others thought their employer would cover over 75% of their wages. As part of our advice process we need to encourage our clients to ask their employer what their benefits might be.
While our research found people believed the state would look after them, many were surprised that statutory sick pay is currently pegged at £96.35 per week and would not cover even a proportion of their monthly outgoings. How many of your clients could survive on this amount when you consider the average monthly outgoings found in our research was £2,889 a month?
Demonstrate a workable Plan B
There are some useful tools available from Legal & General to help demonstrate and expose the flaws in plans when it comes to relying on others. The purpose is to help a client build a Plan B that can be relied upon to provide an income when illness or injury stops them from working.
Legal & General’s Deadline to Breadline calculator can help highlight the need for cover and help you have a more focussed conversation with your clients. The Plan Ahead sales aid PDF size: 268KB focuses the attention on the employer and state benefits available to clients, and importantly asks the question, “Is that enough?”
By using research such as Deadline to Breadline, sales aids and tools, you can add great value to your clients' lives by giving them the opportunity to explore their own reality, assess what’s important to them and provide guidance to the solutions that would help them and their families at times of financial uncertainty.
In other words, put your client in an informed position so they can base their plans on reality and not a perception created through myth and misconceptions.