CASE STUDY

Joanne and Phil have been married for 11 years and have two children together, aged 7 and 10. They’re at fee-paying schools. Phil also has a son from a previous relationship. Joanne works as a graphic designer and Phil is a director for a small manufacturing company.

THE NEED FOR PROTECTION

They’ve been with their financial adviser for years, since they arranged their first mortgage. She’s been talking to them recently about planning for university for the children as well as looking to the future and their retirement approach.

HOW CAN A MENU PLAN HELP?

Life with Critical Illness Cover (on an increasing basis) for Phil

This could be for a smaller amount, 6 months’ salary for example. The lump sum would go up in line with inflation too. The family would have an additional sum to use for paying bills, or any additional expenses that arise from treatment.

Life with Critical Illness Cover (on an increasing basis) for Joanne

This would be an additional policy that covered Joanne until she reached retirement and increases in line with inflation.

Joint Life with Critical Illness Cover (decreasing in line with their mortgage)

This means Phil or Joanne would get a lump sum if one of them got a critical illness or died. There would just be one payout for whichever event happened first (but they could choose a replacement cover option to continue cover for the remaining person). They've taken enough cover to be able to pay off the mortgage if they have to make a claim. The amount will go down each year in line with what they have left to pay on their mortgage. And because they have critical illness cover, they may also get an amount of free children's critical illness cover for each of their two children if anything happened to them.

Life Cover (on an income basis) for Phil

This means if Phil died, the family would have a monthly income to help pay the bills and allows the children to stay in school.

Conversation Tips

• Cover for smaller amounts is often easier to manage from a budgeting perspective and can be increased with Guaranteed Insurability Options should the need arise.

• A menu plan would let your clients add policies throughout their lives to cover new events, like having children or buying a new home.

• If your clients had a cash point in their home, they’d take out contents insurance to protect it, yet they don’t think of themselves in those terms. They’re the ones earning the money, so talk to them about protecting themselves so they can protect that revenue stream.

• Talk to your clients about what’s important to them – ‘college fee cover’ or ‘paying off the mortgage cover’ – rather than ‘life insurance’.

• Discuss the ‘value of a parent’ – focus on how much it would cost a family if they had to pay for all of the things a parent does – taxiing the children to school, doing the housework, even mowing the lawn. Who would do all these things if a parent became critically ill or died?

• Talk to your client about the impact on their children’s lifestyle in the event of a critical illness or death of a parent. Cover on an income basis could help maintain a sense of stability if the worst happens.

• Remember the value of free children’s critical illness and life cover, included with many protection policies.

• Clients don’t have to take life cover in relation to the mortgage on a decreasing basis, a level term assurance would give them a cushion that could help pay the bills and keep the cash-flow moving in the event of a critical illness or death.

• Ask your clients whether they have emergency cover for their white goods? People are quite happy to pay for extended warranties on their washing machine or fridge freezer but not themselves. Have they got their priorities right?