Opinion & Analysis
Tweaking the features to create a tailored IP solution
06 Sep 2022
“I encourage advisers to look again and refresh their IP knowledge to understand the nuances of how Income protection solutions can be tweaked and refined to specific client needs” says Robert Betts – Market Development Manager at L&G
Amount of cover, length of claim and policy term
“When setting up a policy, one of an advisers’ key goals is to find the “sweet spot” between level and length of cover, affordability and the length of time before a policy pays a benefit.”
A simple and effective way of achieving this could be by lengthening deferred period from a few weeks to a few months or maybe a year.” Considerations in achieving the right balance include an understanding of the client’s current sick pay arrangements, how long they last for and the client’s willingness to use existing savings in the short term to support themselves.
An increasingly popular option that accounts for around half** of all new Income protection solutions purchased are the “Low Cost” plans or “limited benefit payment plans”.
Most providers offer these, the purpose is to reduce cost by limiting how long the claim is paid for – e.g., Legal and General offers either a one or two-year limited payment plan where the benefit stops after 12 or 24 months of claim.
Your clients’ future career plans are a great indicator for how much they need and for how long. You can write policies up to age 70 with most providers, tempting as it might be, it isn’t always necessary. “Typically, we say IP should cover you up to retirement, however if your client has pension provisions that kick in earlier then cover should be written to reflect this, again making the solution more affordable “.
Darren Bowers – Senior Product Manager at L&G adds “With skill and a little knowledge, all the options already mentioned can be combined to meet a clients’ changing needs in an affordable way”.
Every client is different with different needs, for some the need might be for the maximum benefit with the shortest deferred period, however the ideal solution can sometimes be a little costly. With some insight and understanding of how the policies work an adviser could propose a more affordable solution – maybe using a split deferred period, where ½ the benefit is paid after a 4-week deferred period, with the remaining benefit pays out after 8 or 12 weeks. Structuring covers this way ensures there is some cover for short term absence and full cover for more serious long-term periods making the cover more affordable for the customer.
If you’ve discussed a low cost payment period, maybe 1 or two years , but the customer is still concerned about long term absence, it’s worth considering using 2 policies, one policy for ½ the benefit to pay out for the full term, and the second policy for the other ½ of the benefit with a 2-year limited payment period, resulting in the customer receiving 100% of their benefit initially, dropping to 50% when the 2-year policy reaches the end of the claims period.
If your client expects their mortgage to be paid off by the time they reach 55, do they need full cover to retirement? A possible solution might be to set up 2 IP policies, 1 of which matches the mortgage payments to end at age 55, the other will cover all their other expenses and can run up to retirement.
“Once the need has been established, an affordable solution is the goal maybe by splitting the benefit across 2 policies, benefit levels could be retained in a more flexible and affordable way and would also receive a multi benefit discount”.
With just a little bit of thought and knowledge advisers can guide their clients to affordable solutions that will put certainty back into their future lives should things not go quite to plan.
Legal and General are dedicated to supporting advisers develop their skills and understanding of the solutions to help clients achieve better outcomes.
Robert Betts – Market Development Manager and Darren Bowers – Senior Income Protection Product Manager at L&G
Legal and General will be actively supporting IPAW week with a series of lunch “n” learn webinars from Monday 19th to Friday 23rd September at 1:30pm – 2pm each day
Monday 19th – Deadline to Breadline 2022 – Why the time is now for IP
L&G’s latest research into the cost-of-living crisis – introducing the role of income protection as a key part of delivering a safety net to the cost-of-living crisis
registration link- https://attendee.gotowebinar.com/register/8636837984340293132#
Tuesday 20th –Frames and Anchors – Positioning Income protection as an integral feature of the mortgage advice process
By framing the need early and helping advisers understand simple ways to anchor the importance of Income Protection as part of the mortgage advice process, better client outcomes can be achieved.
registration link https://attendee.gotowebinar.com/register/5754784911477052174
Wednesday 21st – Keep the cash flowing – Write it or refer it: decision time for wealth advisers
By highlighting the loss of an income as part of cash flow modelling, Wealth advisers can reveal an often-overlooked scenario, leaving a decision to be made – either write the cover themselves or refer it, ignoring it may not be an option as it could be the difference between a client achieving or losing their future hopes, dreams aspirations and goals.
registration link https://attendee.gotowebinar.com/register/6442334821093082896
Thursday -22nd – IP for the SME – Growing your advice business with Income Protection
Don’t forget your business clients – This webinar will introduce the idea of using Executive income protection and Key Person Income Protection as steppingstones into the wider business protection market
registration link https://attendee.gotowebinar.com/register/8762811230430937613
Friday – 23rd – Just do it! – Putting inspiration into practice
Exploring in detail the nuances of generic product features and how they can be used to build creative affordable safety nets for clients
All IPAW week webinars have been accredited by the Chartered Insurance Institute for the purpose of structured CPD.