Over the coming weeks I’m delving deeper into the study into the value of advice. The report raised a number of key points which I covered in my previous post. Today I will look further at the topic of insurance.

The report highlights that the advised group had a higher proportion of people with insurance (as well as pension provision and investment products, but one thing at a time). Now the cynics amongst you will say “of course they do, because they’ve been flogged it by a commission hungry IFA“.  Well let’s look at some figures:

  • The average household family spend is £474 per week.
  • It costs on average £10,382 a year to raise a child until they are 21
  • It costs around £5103 a year for a part time nursery place

Widowed parent allowance is a maximum of £108.30 a week. That won’t go very far.

Death can have serious implications for the lifestyle of those left behind, but financial difficulties need not be a burden at a time when so many other things are pressing. Even a small amount of life insurance could make a big difference.

Perversely, surviving a serious illness can have even greater financial consequences than death, and surviving a serious illness is becoming more and more likely. Figures from one leading insurer’s claims are quite revealing:

  • 37% of critical illness claims were by people under 40
  • More than 1 in 3 people who suffer a heart attack survive
  • The youngest person to claim for cancer was 24
  • The youngest person who claimed for a heart attack was 23
  • 7 out of 10 cancer patients suffer a loss of income or higher costs as a result of their diagnosis

Surviving a serious illness could lead to

  • the loss of the income of a wage earner
  • increased childcare costs for a house person no longer able to care for children
  • added costs involved with treatment and recovery

Some have the luxury of full sick pay from their employer, but rarely for longer than a year. Figures from AVIVA assert that in 2011 the average length of an Income Protection claim was 10 years and that 66% of claims had been in payment for 5 years or more. So if you’re going to be ill, and you’re lucky enough to survive, there’s a good chance you will not be able to work for some time. 1 year full pay won’t go very far.

You may only be entitled to statutory sick pay of £86.70 for 28 weeks. Following this you may be entitled to Employment and Support Allowance which starts and £71.70 a week (less if you’re under 25) and rises up to a maximum £106.50 a week. That won’t go very far.

All this to demonstrate the importance of adequately insuring your life, your health and your income.

For the cynic – I’m sure there must be the odd commission hungry, insurance flogging IFA out there – but these figures highlight the importance of having the right cover in place and if this advice comes via a good IFA then you can rest assured that you have the appropriate cover in place.

Finally, perhaps controversially, even if someone was persuaded to buy an insurance policy by an unscrupulous salesman – it doesn’t automatically mean that the policy was not suitable. Ask a widow who’s claimed on a life policy if she regrets that her late husband was persuaded to buy a life insurance policy by a commission-hungry IFA. I’m sure you know the answer.

Question: Are you certain that  your family’s financial well-being is secure in the event of your death or long term disablement.

Unless otherwise stated, all facts and figures are taken from literature on the Bright Grey website.

Disclaimer: The views expressed in this post are those of the author only and are not necessarily those of I Planning Wealth Management Ltd. All material in this post should be considered as general information only and should in no way be construed as a recommendation of a specific product or course of action. Each circumstance is different and professional advice tailored to your circumstances should be sought from a qualified financial adviser.