Better than cash under the bed

With the credit crunch tightening its grip, the recession well underway and repossessions on the rise the message from the insurance industry is that consumers need protection products now more than ever.

But with many banks in trouble, some of your clients may be wondering whether they would be better off creating their own catastrophe funds by stashing their cash in boxes under their beds.

The idea of saving for a rainy day is not new, but is it a credible alternative to taking out life assurance or income protection?

At the moment, life assurance is as cheap as it has ever been. Assuming a consumer could buy a policy for £150,000 of cover for around £15 per month, it would take them more than 10 lifetimes to build up a similar lump sum by stashing those premiums in a box.

In fact, an average person would have to save more than £300 a month during a working life of 40 years to save that much, and most people do not save anything like that as they have bills and expenses to pay.

And even if a consumer could save that amount each month, what if something goes wrong before they have the chance to build up their catastrophe fund?

So yes, in terms of saving for a rainy day, protection can be seen as a wise alternative.

And with the appropriate cover in place, your customers and their hard-earned savings will be protected if things go wrong in their lives.