It is worth bearing in mind that a critical illness policy might not be able to provide a benefit that will replace the entire projected capital loss caused from a critical illness. So, within our recommendation to Fred and Janice we might want to consider a balance between critical illness insurance and other solutions, such as private medical insurance, long-term care insurance and even personal accident cover.
The most important conversation?
We have covered off critical illness and death within our modelling, but what about the one thing that the whole process is built upon? The one thing that will allow Janice and Fred to achieve their objectives? Income.
Without income, how do any clients expect to be able to maintain their pension and investment contributions? How do they maintain the standard of living they are accustomed to? What is the risk of a client having to take time off work due to sickness or injury?
At the top of the protection hierarchy of needs should be income protection. If our current standard of living and our aspirations for the future are built on today’s income, we really should look at protecting it.
Demonstrating the risks
Even though we have just introduced the idea of catastrophes like death, serious illness or long-term sickness from work derailing clients’ plans for the future during cash flow modelling exercises, we might still need to make the idea of risk more real to clients.
Risk calculators are commonplace among protection providers today, and these often very simple, tools can be a powerful bit of kit. By inputting some basic details about your clients, you will be able to produce a bespoke report highlighting the client’s probability of making a claim on a life policy, a critical illness policy and an income protection policy.
A Trojan horse?
You could say we have now covered the basics of any protection conversation, life, critical illness, and income protection. But could we take the conversation even further?
What if Janice and Fred were not employees but were instead key people within a business? Perhaps Janice is the director of a manufacturing company. Have both Janice and the business considered what her exit strategy might look like?
Perhaps her intention is to fund some or all of her retirement by selling her stake in the business. But if someone instrumental to the success of the business suffered a critical illness or died, what impact might this have on their ability to stay afloat? Could these risks impact the value of a business too?
