Blog: Time to make protection a must-have

Friends Life protection expert Graham Harvey says advisers must help ‘squeezed middle’ clients overcome the objection that protection is too expensive…

There have been plenty of news reports following this year’s Budget announcement, many of which have focused on the fact that middle-income families are feeling the pressure from all sides, and it doesn’t look as though the situation is likely to improve for ‘Middle Britain’ any time soon.

Last year the Coalition announced plans to stop paying child benefit to higher-rate taxpayers, including families whose joint income exceeded the threshold of just over £40,000 a year. This change, which will affect one and half million households, comes into effect in January 2013.

Many of those whose benefits will be lost could already have been affected by the reduction in the higher-rate tax threshold (which changed from £43,475 to £42,475 on April 6), meaning they now pay more tax as well as losing out on benefits.

These cuts, coupled with the economic downturn and lower increases in wages mean the belts around the squeezed middle remain tight. Families are undoubtedly bearing the brunt of these changes and financially may think one area to cut back on during these challenging times is life insurance cover.

Over recent years people’s priorities have changed and things that not so long ago were considered as luxuries are now necessities for some. According to recent research we conducted, more than one in five of under-34s consider a Smartphone as a necessity while 80% of middle income families rated the internet as vital to their lives.

The big challenge for advisers in this climate is to overcome the common objection to purchasing protection products on the grounds that it is too expensive. Helping clients to save money in other areas is a good starting point and will help people to prioritise better in these difficult financial times.

Considering alternative iPhone/Smartphone or internet providers is a good way of counting the pennies and making a few seemingly small but significant savings. Shopping around for a cheaper internet provider makes good practical sense anyway, to ensure that we are always getting the best for our money. Making savings in these areas might help to encourage people to invest in crucial cover that they should be prioritising.

As an industry it’s time we made protection a must-have. Whether the economy as a whole is fragile or not, there will always be something else to pay for. We need to help those people who feel that they are being squeezed by showing them how they can manage their finances as a whole so that they can afford protection. Demonstrating that protection should be on everyone’s must-have list is equally vital.

Graham Harvey is managing director, individual, at Friends Life