Do I need protection

I don’t need protection, I’m young!

Highlighting the premature death of Rugby player, Jonah Lomu, to evidence the fact that no matter how young we are, we all need some sort of protection.

When my business partner and I started our insurance brokerage, Vita, we were both in our twenties; young, healthy and optimistic about the future. Having friends of a similar age bracket, I would often challenge them and check that they had the appropriate insurances in place – such as Income Protection, Critical Illness Cover and Life Insurance.

The typical response was that they believed (or may still believe) they are too young to need such protection. Certain events can help adjust people’s’ perceptions and misconceptions – which is why I wanted to write about the recent death of Jonah Lomu, one of Rugby’s greatest stars – he was just 40 years old.

His death was mourned across the world and highlighted that our time on earth comes with no guarantee of longevity.

Despite his fame and success Jonah died relatively broke. The mansion he shared with his family was rented, the cars bought on finance and had very little in the way of savings. His lack of assets and savings has been blamed on maintaining a lifestyle that 20 years of illness made unaffordable. The chances are that he’d have been off work for much of the twenty years of illness, dialysis and surgery he endured. Jonah’s story is clear evidence, if any were needed, that you’re never too young to take out the cover you need.

As bad as the situation is, there is a worldwide community of loyal fans who have set up a trust fund to provide an income for his sons. That would not be the case had he been just another working man from across the street. Also, if he’d lived in the UK, where only 9% of working households have any income protection in place, it’s highly unlikely that he’d have had protection in place1.

As sad as they are, such high profile cases present an opportunity for advisers, like myself, to introduce protection to conversations. Most clients will need at least some protection, but they just don’t buy it, and those who do, don’t buy enough of the right cover.

Income Protection, which covers the highest risk we face – being unable to earn a work due to ill health – physically or mentally, remains the protection underdog.

In fact, we live in a topsy turvy world where the most bought cover is life insurance and the least is income protection. Why? Perhaps because life cover is easy to sell – we all die and it’s cheap. However, on closer inspection, the reason why it’s so cheap is quite clear – we rarely die prematurely. Conversely, income protection is relatively more expensive because the risks are so much higher, which would surely be an indication that clients need it.

When advising clients I feel an obligation to highlight the limits of state support, because it is very limited. Most are only vaguely aware of what kind of support they could expect to receive. Highlighting the reality can be enough to open their eyes to the need for more than just some life cover. You can easily do this using

If there’s any doubt, you only need to look at the depth and breadth of welfare reform to understand that state support is likely to be limited. Benefit caps, the bedroom tax, means-testing, the move to universal credit are just some of the changes the government has made to reduce the welfare bill.

Our benefits system is complex as is the application process. Figures from the Health and Work Report (2011) tell us that each year 650,000 people make a claim for Employment Support Allowance (ESA) but only around 300,000 end up with any health related benefit. Those odds aren’t that great. Add to that the limited support most employers offer and the gap becomes quite evident.

Our income is what drives our lifestyles financially. Without an appropriate level of income, the financial and physical impacts can be severe. Whilst we all naturally like to be optimistic, it would be good if everyone took a moment to put provisions in place, to help safeguard themselves, their family, their mortgage and their income.

Barry Pappin – Protection Specialist and Co-founder of Vita – an independent, national award winning, insurance brokerage in Cardiff.  

Source: 1Mintel Income Protection – UK February 2015.  Thanks to Denise Wond at Royal London for her input into this article.

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