People are not just being advised that it’s a good idea – the German government is making it compulsory. What a great idea.
What a difference it could make if the government in the UK took this kind of stand and made income protection compulsory.
Of course, this may remain a fantasy in the UK, and perhaps understandably so, given insurers would have to provide cover regardless of a person’s medical history, age or circumstances.
In Germany it appears that insurers cannot underwrite, can’t rate premiums, can’t exclude pre-existing conditions and won’t be able to lapse policies even if policyholders stop paying premiums.
And let’s not speculate on what the premiums might be like or whether or not such a proposal is sustainable in the industry.
But we all know about the state of this nation and the level of underinsurance we face.
Scottish Widows research shows that the average household is underinsured to financially survive a major health crisis by around 52,000. And that’s just taking the essentials into account, such as paying the mortgage and household bills. It wouldn’t even maintain their standard of living.
The picture isn’t much better for protecting dependants upon death, with the average household being underinsured by 48,000 on that count – again just to cover the essentials.
A staggering 68% of people don’t have critical illness cover and 60% are without any form of income protection. Think what it would be like if we lived in a country where it was compulsory to have income protection. The protection gap would shrink.
More people are surviving serious illnesses but not always in good health, and even if they get back to full strength, what happens during their recovery period?
For example, if we all had IP there would be fewer people losing their homes and businesses, cashing in their pensions, spending their savings or having to rely on friends and family who could easily end up in the same situation themselves.
Maybe I’m getting carried away thinking that the UK government might step in to help solve the problem of the protection gap. But who knows, there might come a time when everyone is protected and the protection gap is a thing of the past.
Until that day, let’s keep up the fight to get the message across to customers. They rely on us, their advisers, to lead them to that brave new world.