Imagine for a moment, if you will, a client calls seeking guidance for home insurance.
They advise you that they have just spoken to a home insurance broker. To keep matters simple and to help keep the cost down, the broker recommended insuring half the house.
Let that sink in for a moment. Insuring half the house - what next? Insure half a car? Half a holiday?
Sounds ludicrous, right?
Allow me now to introduce my parents. They bought their residential house in 1979. Their broker arranged a mortgage and he arranged a life cover policy with a sum assured to cover just the mortgage balance.
My father recalls that the question asked was: “If you were to die, would you want your mortgage paid off?”, to which they both replied, “yes”.
Sounds straightforward enough. My father was a forklift driver and my mother was a housewife. Neither were particularly financially savvy.
At future reviews, the conversation focused on the mortgage renewal and there was no further mention of a protection review. There is no conversation around my mother being a housewife, who by 1988 is raising three children, with my father’s income being the sole household income.
There is no conversation regarding their lifestyle, just that they have the mortgage covered should either of them die.
So, what’s the point of this family story? I believe the broker only insured half (or less) of their true value.
He protected the mortgage and nothing else. In the event of their passing, the mortgage would be paid off.
That’s one of the expenses taken care of, but what about the others? Food, bills, education costs, after school clubs, their goals and ambitions in life, financial support for the children, retirement planning and so forth. In short, the lifestyle they had envisaged for themselves and their children.
My father and mother are both thankfully still alive and my father was able to work until he could retire at his choosing.
So why do I refer to this? Well, 40 years later here we are in 2019 and the protection conversation still, for many, revolves around the mortgage.
The products may have changed but the initial conversation has barely evolved: “If you die or are critically ill, would you want your mortgage paid off?”.
There is more to a client than a mortgage. A client may be renting and have no mortgage. Is protection planning of any less importance to them?
As an industry we need to make one simple change and ask: “If you die, are unable to work due to sickness or are critically ill, what would you like and what would you need financially?”. Then sit back, shut up and listen.
