INCOME PROTECTION SHELLEY READ SENIOR PROTECTION DEVELOPMENT AND - - PowerPoint PPT Presentation

WHY MORTGAGE CLIENTS NEED INCOME PROTECTION

SHELLEY READ SENIOR PROTECTION DEVELOPMENT AND TECHNICAL MANAGER

WHY MORTGAGE CLIENTS NEED IP

• Underwriting during Pandemic
• State of the income protection nation
• Dreaded Call
• Illustrating the chance of a protection claim
• 5 simple steps to sell income protection
• Designing an IP solution on a tight budget

AGENDA

WHY MORTGAGE CLIENTS NEED IP

At the end of this webinar you will:

• Have an awareness regarding what happens when people go off work

sick and why losing income can cause extra problems

• Understand the latest levels of state benefit that can be claimed in the

event of sickness or incapacity for 2020/2021

• Be able to illustrate protection risks for your clients based on their own

individual circumstances

• Follow a simple 5 step process to help your clients understand their

protection risks and their priorities

• Understand how Royal London can help you create a tailored income

Protection solution which fits within an affordable budget

LEARNING OBJECTIVES

UNDERWRITING

DURING PANDEMIC

• Coronavirus application questions
• Medical evidence
• Non medical limits
• Temporary underwriting limits for higher risk customers
• NHS workers
• Claims
• Keeping you up to date

WHY MORTGAGE CLIENTS NEED IP UNDERWRITING

WHY MORTGAGE CLIENTS NEED IP A DREADED PHONE CALL?

STATE OF THE NATION

GOING OFF WORK SICK

STATE OF THE NATION BEING OFF WORK SICK

• It’s estimated that 141.4 million days were taken as ‘sick-days’ in the

UK, in 2018

• Often, this is for minor issues
• Sometimes the sickness is more serious
• Some people stay off work for long periods of time
• Some people never return to work again

Source – Office of National Statistics Nov 2019

Minor Serious

• ff work sick

STATE OF THE NATION BEING OFF WORK SICK

• The average full time income in the UK in 2019 was £30,420*
• Rounded to an annual income of £30,000 this equates to net take

home pay of (based on England & Northern Ireland tax & NI deductions) :

• £2,003 per month net or
• £462 per week

What happens to people and families when they lose their income?

Source – Office of National Statistics Nov 2019 (*) Take home pay calculated for 2020/2021 tax year

THE VICIOUS CIRCLE THE PROBLEM

Off work sick Lose income Bills to pay Need time to recover

Financial Stress Return to work too early

Off work sick Lose income Bills to pay Need time to recover Financial Stress Return to work too early Reoccurrence of incapacity Reoccurrence of incapacity

STATE OF THE NATION

STATE BENEFITS

CLAIMING STATE BENEFITS STATUTORY SICK PAY

• SSP (Statutory Sick Pay) is only available to Employees.
• Claimants need to be off work sick for 4 or more days in a

row (including non-working days)

• The benefit level for SSP (2020/21) is £95.85 and is payable for

up to 28 weeks Income Drop

• f 79% (*)

Source – https://www.gov.uk/employers-sick-pay/entitlement - tax year 2020/21 * Based on annual income of £30,000 per annum

£462 £95.85 Income SSP

CLAIMING STATE BENEFITS EMPLOYMENT & SUPPORT ALLOWANCE

• ESA (Employment & Support Allowance) is claimable by employees

after their Statutory Sick pay ends (28 weeks)

• Claimants who qualify for the Work Related Activity group will receive

an ESA benefit of up to £74.35 per week.

• Jobseekers Allowance pays a benefit of up to £74.35 per week.
• ESA claimants who qualify for the Support Group can receive up to

£113.55 per week

Source – https://www.gov.uk/employment-support-allowance/what-youll-get

• Based on annual income of £30,000 per annum
• Figures based on tax year 2020/21

Income Drop

• f 84% (*)

Income Drop

• f 75 % (*)

CLAIMING STATE BENEFITS CLAIMING ESA

There are 64 pages in the current ESA application form. 55 of which need to be fully completed with information to support the claim

Source - https://www.gov.uk/government/publications/employment-and-support- allowance-claim-form

STATE OF THE NATION

SAVINGS

STATE OF THE PROTECTION NATION SAVING FOR A RAINY DAY…

• According to a Money Advice Service survey in Oct 2018 10.7

million adults* in the UK rarely or never save

• This is 21% of the population
• 53% of 22 to 29 year olds had no money saved in a savings account
• r an ISA between 2014 and 2016**
• £5,000 of savings could provide a replacement income (for the average

annual income) for just over 10 weeks **Source: Office of national statistics – Oct 2018– Link *Source: Building the Financial Capability of UK Adults – 2018 –Money Advice Service – link

STATE OF THE PROTECTION NATION REPLACING INCOME WITH SAVINGS

1500 1500 1500 500

• 2000
• 1000

1000 2000 3000 4000 5000 6000

Month 1 Month 2 Month 3 Month 4

Reference: 4 month income loss analysis - assuming average income of £30,000 per annum and average savings of £5,000. Monthly outgoings of £1,500

Savings Savings Savings

500

*Savings not including any SSP the client would be entitled to

STATE OF THE PROTECTION NATION HOW LONG DO IP CLAIMANTS CLAIM?

• Royal London’s claims statistics

report published in 2019 that the average length of time for Income Protection claims is 9 years and 11 months

• That’s the loss of 119 paydays

Source: Royal London Claims Statistics – published 2019 (claims year 2018)

ROYAL LONDON AVERAGE AGE OF CLAIMANTS

The average age of IP claimants with Royal London (new claims admitted in 2018) was….

• 43 years old

Source: Royal London Claims Statistics, published 2019 - link

REMINDER OF NON-MEDICAL LIMITS

ILLUSTRATING THE CHANCE

OF A CLAIM

ILLUSTRATING PROTECTION RISKS & SHORTFALLS

Royal London State of the Protection Nation

• Of all consumers surveyed only 11% felt they were likely

to go on sick leave for three months or more

• Only 14% of consumers say they're likely to contract a

serious illness in their working life.

Source: Royal London State of the Protection Nation 2019 - link

PROTECTION PRIORITIES RISK OF CLAIM

• Bob, Male, 28 next birthday
• Non Smoker
• Earns £30,000 per annum
• Probably will work until age 70
• No protection plans in place…

What is the risk and chance that Bob would actually need to make a claim on a protection plan during his working lifetime?

PROTECTION PRIORITIES RISK OF CLAIM

Lets imagine you had 100 clients like Bob on your client base…

Source – Royal London Marketing Studio – February 2020. Risk Report. Male age 28 nb, non smoker, Analysis up to retirement age 70

PROTECTION PRIORITIES RISK OF CLAIM

How many of your clients will die before their retirement age of 70?

Lets imagine you had 100 clients like Bob on your client base…

5% or 5 in every 100!

Source – Royal London Marketing Studio – February 2020. Risk Report. Male age 28 nb, non smoker, Analysis up to retirement age 70

PROTECTION PRIORITIES RISK OF CLAIM

How many of your clients will suffer a critical illness before their retirement age of 70?

Lets imagine you had 100 clients like Bob on your client base…

17% or 17 in every 100!

Source – Royal London Marketing Studio – February 2020. Risk Report. Male age 28 nb, non smoker, Analysis up to retirement age 70

PROTECTION PRIORITIES RISK OF CLAIM

How many of your clients will be off work sick for 2 months

• r more before their retirement age of 70?

Lets imagine you had 100 clients like Bob on your client base…

37% or 37 in every 100!

Source – Royal London Marketing Studio – February 2020. Risk Report. Male age 28 nb, non smoker, Analysis up to retirement age 70

PROTECTION PRIORITIES RISK OF CLAIM

How many of your clients will make any kind protection claim before their retirement age of 70?

Lets imagine you had 100 clients like Bob on your client base…

50% or 50 in every 100!

Source – Royal London Marketing Studio – February 2020. Risk Report. Male age 28 nb, non smoker, Analysis up to retirement age 70

What are the risks faced by a typical client?

• Bob
• Age 28 nb
• Non Smoker
• Analysis to age 70

ILLUSTRATING PROTECTION RISKS & SHORTFALLS

The chance that any of these things could happen?

Source – Royal London Marketing Studio – February 2020. Risk Report. Male age 28 nb, non smoker, Analysis up to retirement age 70

ROYAL LONDON MARKETING STUDIO RISK REPORTS – I DON’T THINK I NEED IT?

What are the risks faced by a typical client?

• Bob
• Age 28 nb
• Non Smoker
• Analysis to age 70

Source – Royal London Marketing Studio – February 2020. Risk Report. Male age 28 nb, non smoker, Analysis up to retirement age 70

ROYAL LONDON MARKETING STUDIO RISK REPORTS – I DON’T THINK I NEED IT?

Risk Risk Repor eport CI CI Repo eport IP R IP Repo eport

Source: studio.royallondon.com

5 SIMPLE STEPS TO

SELL PROTECTION

5 SIMPLE STEPS TO SELL PROTECTION

• 1. Explain what a protection

review/audit is and the purpose of this meeting today

• 2. Find out what’s important to them

as a family?

• 3. Ask them how they would feel if they

have just been paid for the last time

• 4. Talk about the risks they face
• 5. Prioritise the needs they want to

address

5 SIMPLE STEPS TO SELL PROTECTION

• 1. Explain what a protection

review/audit is and the purpose of this meeting today

• 2. Find out what’s important to them

as a family?

• 3. Ask them how they would feel if they

have just been paid for the last time

• 4. Talk about the risks they face
• 5. Prioritise the needs they want to

address

• 1. EXPLAIN THE PURPOSE

OF THIS MEETING TODAY

• Let me explain how I work with my clients…
• There are significant risks you and your family could face

financially

• The purpose of this protection meeting today is…

‘to make sure that should the worst happen, you and your family are able to keep your home and maintain your lifestyle…’

How does that sound?

5 SIMPLE STEPS TO SELL PROTECTION

• 1. Explain what a protection

review/audit is and the purpose of this meeting today

• 2. Find out what’s important to

them as a family?

• 3. Ask them how they would feel if they

have just been paid for the last time

• 4. Talk about the risks they face
• 5. Prioritise the needs they want to

address

• 2. FIND OUT WHAT’S IMPORTANT TO THEM

TELL ME ABOUT YOU…

Before I can advise you, I need to get to know you… tell me what do you like to do as a family? What you enjoy? What about the children?

• Why is this an important conversation?

Meals Holidays Pub Sports Children Theatre Caravan Mini breaks Gym Camping Hobbies Dancing Cars Shows Motorbikes Pub lunches Comedy Sky Sports Cinema Pets

5 SIMPLE STEPS TO SELL PROTECTION

• 1. Explain what a protection

review/audit is and the purpose of this meeting today

• 2. Find out what’s important to them

as a family?

• 3. Ask them how they would feel

if they have just been paid for the last time

• 4. Talk about the risks they face
• 5. Prioritise the needs they want to

address

• 3. WHAT IF YOU’VE BEEN

PAID FOR THE LAST TIME?

• If your income stopped yesterday, what

would you want to happen to your lifestyle, standard of living & ability to maintain your home?

• Why is this an important conversation?

5 SIMPLE STEPS TO SELL PROTECTION

• 1. Explain what a protection

review/audit is and the purpose of this meeting today

• 2. Find out what’s important to them

as a family?

• 3. Ask them how they would feel if they

have just been paid for the last time

• 4. Talk about the risks they face
• 5. Prioritise the needs they want to

address

• 4. TALK ABOUT THE

RISKS THEY FACE

You’ve painted a vivid picture of your lifestyle and family life… Tell me the risks which could affect your lifestyle in a negative way? What is the worst thing that could happen to affect your lifestyle? Or if you have already arranged a mortgage for your client…

• 4. TALK ABOUT THE

RISKS THEY FACE

• You’ll remember this statement which appears on all

mortgage key facts illustrations and on your mortgage

• ffer…
• We need to have a conversation about what those

risks are and find out whether there is something we need to do…

Your home is at risk if you do not keep up repayments on your mortgage or other loans secured on it…

• 4. TALK ABOUT THE

RISKS THEY FACE

• You’ll remember this statement which appears on all

mortgage key facts illustrations and on your mortgage

• ffer…

What are the risks that could potentially stop you from keeping up your mortgage repayments?

Your home is at risk if you do not keep up repayments on your mortgage or other loans secured on it…

What are the risks faced by a typical client?

• Bob
• Age 28 nb
• Non Smoker
• Analysis to age 70

ILLUSTRATING PROTECTION RISKS & SHORTFALLS

The chance that any of these things could happen?

Source – Royal London Marketing Studio – February 2020. Risk Report. Male age 28 nb, non smoker, Analysis up to retirement age 70

5 SIMPLE STEPS TO SELL PROTECTION

• 1. Explain what a protection

review/audit is and the purpose of this meeting today

• 2. Find out what’s important to them

as a family?

• 3. Ask them how they would feel if they

have just been paid for the last time

• 4. Talk about the risks they face
• 5. Prioritise the needs they want

to address

• 5. PRIORITIES THE RISKS

THEY WANT TO ADDRESS

Tell me the risks you wish to address and in which order? What is your first priority?

5 SIMPLE STEPS TO SELL PROTECTION

• 1. Explain what a protection

review/audit is and the purpose of this meeting today

• 2. Find out what’s important to them

as a family?

• 3. Ask them how they would feel if they

have just been paid for the last time

• 4. Talk about the risks they face
• 5. Prioritise the needs they want to

address

DESIGNING AN IP SOLUTION

ON A TIGHT BUDGET

DESIGNING AN IP SOLUTION HOW MUCH IS JUST ENOUGH?

How much will income protection cost me? I’ve heard it’s expensive???

DESIGNING A MORTGAGE PROTECTION SOLUTION

• Bob 28 nb, Sue 30 nb
• Both non smokers
• Bob is the main income earner on £30,000 and

employed full time

ON A BUDGET

• Sue works part time and earns £10,000 per annum
• They have £10,000 in savings - but nothing else they could use

to replace their income in the event of sickness or incapacity during their working lifetime, other than state benefits.

• They have a repayment mortgage which is £150,000 over 25

years

Case Study parameters – both clients class 1 occupations – Bob’s occupation Office Manager, Sue’s occupation Secretary

DESIGNING A MORTGAGE PROTECTION SOLUTION ON A BUDGET

• Having seen the likelihood of claim, they want to include some

Income Protection, but are worried they won’t be able to afford the cover they need

• Their budget is £25 to £30 per month
• Bob 28 nb, Sue 30 nb
• Both non smokers
• Bob is the main income earner on £30,000 and

employed full time

Case Study parameters – both clients class 1 occupations – Bob’s occupation Office Manager, Sue’s occupation Secretary

Joint Life Cover (Mort Rep Guarantee) decreasing 25 years £150,000

Total Cost: £7.89

£7.89

Income Protection for Bob? Income Protection for Sue?

DESIGNING A MORTGAGE PROTECTION SOLUTION ON A BUDGET

Source: Royal London Personal Protection Menu, Quotes produced March 2020 - Bob age 28 nb and Sue 30 nb, both non-smokers. Both class 1 occupations. Individual costs shown include £2.60 plan charge

INCOME PROTECTION

HOW MUCH COULD THEY HAVE?

Bob Sue Term Amount Level / Increasing Deferred Period Payment Period Monthly Premium

42 years (to age 70) £18,000 (max allowable) Indexed RPI 4 weeks Full Term 40 years (to age 70) £6,500 (max allowable) Indexed RPI 4 weeks Full Term

£56.02 £24.71

Source: Royal London Personal Protection Menu, Quotes produced March 2020 - Bob age 28 nb and Sue 30 nb, both non-smokers. Both class 1 occupations. Individual costs shown include £2.60 plan charge and waiver of premium

INCOME PROTECTION

IF YOU CAN’T DO ROLLS ROYCE…

Bob Sue Term Amount Level / Increasing Deferred Period Payment Period Monthly Premium

42 years (to age 70) £18,000 (max allowable) Indexed RPI 4 weeks Full Term 40 years (to age 70) £6,500 (max allowable) Indexed RPI 4 weeks Full Term

£56.02 £24.71

37 years (to age 65) £15,000 (£1,250 pm) 5 years 35 years (to age 65) £6,500 (max allowable) 5 years

£9.60

4 weeks 4 weeks 13 weeks 13 weeks

Source: Royal London Personal Protection Menu, Quotes produced March 2020 - Bob age 28 nb and Sue 30 nb, both non-smokers. Both class 1 occupations. Individual costs shown include £2.60 plan charge and waiver of premium

£15.48

Joint Life Cover (Mort Rep Guarantee) decreasing 25 years £150,000

Total Cost: £7.89

£7.89

Income Protection for Bob? Income Protection for Sue? Bob Income Protection D13, £15,000 per annum 37 year term (to age 65) Indexed RPI Sue Income Protection D13, £6,500 per annum 35 year term (to age 65) Indexed RPI

£15.48 £9.60

Plan fee Plan fee Plan fee

Total Cost: £23.37 Total Cost: £32.97

DESIGNING A MORTGAGE PROTECTION SOLUTION

ON A BUDGET

Source: Royal London Personal Protection Menu, Quotes produced March 2020 - Bob age 28 nb and Sue 30 nb, both non-smokers. Both class 1 occupations. Individual costs shown include £2.60 plan charge and waiver of premium

Total Cost: £28.38

Sue - Income Protection D13, £6,500 per annum 35 year term (to age 65) Indexed RPI – 5 year benefit Bob - Income Protection D13, £15,000 per annum 37 year term (to age 65) Indexed RPI – 5 year benefit

DESIGNING A MORTGAGE PROTECTION SOLUTION ON A BUDGET - IN A MENU

Joint Life Cover (Mort Rep Guarantee) decreasing 25 years £150,000

Source: Royal London Personal Protection Menu, March 2020 Couple aged 28 and 30 next birthday, both non-

• smokers. Both class 1 occupations.

Plan fee

Bob Waiver of Premium D13 Sue Waiver of Premium D13

Royal London Protection Menu

MULTI CLAIMS

LIMITED BENEFIT PLANS

CLAIMING INCOME PROTECTION ROYAL LONDON CLAIM JOURNEY

• Bob (30) has an Income Protection plan

with Royal London

• The deferred period is 13 weeks and his

sum assured is £2000 per month

• The payment period is 5 years and the cover

term is until the end of his mortgage in 35 years time

What would Bob’s experience be should he ever need to make a claim?

CLAIMING INCOME PROTECTION ROYAL LONDON CLAIM JOURNEY

• If Bob is unable to work due to sickness, Bob must wait his

deferred period (13 weeks) before any IP benefit is paid.

• Bob is suffering from a muscular skeletal condition
• Because Bob has a 5 year payment IP benefit with Royal

London, he has the potential to make a claim for up to 5 years

Deferred 13 weeks

5 years

Off work sick

CLAIMING INCOME PROTECTION ROYAL LONDON CLAIM JOURNEY

• Bob is off work for a total of 2 years and 3 months and he

has been receiving Income Protection benefit during this time

• Bob has received 2 years of Income Protection benefit
• Bob recovers and returns to work

Deferred 13 weeks Off work sick 2 years 3 months Income Protection claim

5 years

recover

3 years

CLAIMING INCOME PROTECTION ROYAL LONDON CLAIM JOURNEY

• After 2 months back at work, he suffers a relapse of his

musculo skeletal problem and has to go off work sick again

• Bob can claim for a further 3 years if needed – a total of 5

years

• And, he won’t have to wait his deferred period – instead

the claim will be paid straight away

Deferred 13 weeks Off work sick 2 years 3 months Income Protection claim recover

3 years

Income Protection claim Up to 5 years

GOING OFF

WORK SICK

THE VICIOUS CIRCLE THE PROBLEM

Off work sick Lose income Bills to pay Need time to recover

Financial Stress Return to work too early

Off work sick Lose income Bills to pay Need time to recover Financial Stress Return to work too early Reoccurrence of incapacity Reoccurrence of incapacity

THE VIRTUOUS CIRCLE THE PROBLEM

Off work sick Lose income Bills to pay Need time to recover

Financial Stress Return to work too early

Off work sick Lose income Bills to pay Need time to recover Financial Stress Return to work too early Reoccurrence of incapacity Reoccurrence of incapacity

Replace income Pay the bills Take time to recover No financial headaches Return to work when you’re ready Time to recover properly Recover

With an Income Protection backup plan

HOW ROYAL LONDON CAN HELP? INCOME PROTECTION

• Own occupation on all cover
• Fracture cover built into every plan at no extra

cost

• Choice of 1 year, 2 year, 5 year or full payment

benefit terms

• Indexed linked claims
• Minimum Income Guarantee
• Max cover £250,000
• Helping Hand
• Cover increase options (GIO’s)
• and lots more…

WHY MORTGAGE CLIENTS NEED IP

At the end of this presentation you should:

• Have an awareness regarding what happens when people go off work

sick and why losing income can cause extra problems

• Understand the latest levels of state benefit that can be claimed in the

event of sickness or incapacity for 2020/2021

• Be able to illustrate protection risks for your clients based on their own

individual circumstances

• Follow a simple 5 step process to help your clients understand their

protection risks and their priorities

• Understand how Royal London can help you create a tailored income

Protection solution which fits within an affordable budget

LEARNING OUTCOMES

adviser.royallondon.com/protection

The Royal London Mutual Insurance Society Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation

• Authority. The firm is on the Financial Services Register, registration number 117672. It provides life assurance and pensions. Registered in England and Wales number 99064. Registered office:

55 Gracechurch Street, London EC3V 0RL. Royal London Marketing Limited is authorised and regulated by the Financial Conduct Authority and introduces Royal London’s customers to other insurance companies. The firm is on the Financial Services Register, registration number 302391. Registered in England and Wales number 4414137. Registered office: 55 Gracechurch Street, London EC3V 0RL. May 2020 | PR P8 PN 0199