It’s surprising how common it is for clients to worry about bothering someone when they are in a time of crisis or need.
That’s why it’s so important to reiterate to clients that your door is open and they can come to you for help.
Trusts
That brings us onto trusts, many of which relate to life cover.
At the moment, with current delays in the system, bereaved families can be waiting up to two months or more before probate is granted on an uncomplicated estate.
You need to be able to ensure the proceeds of your clients’ policies are paid to their families unencumbered without having to wait for probate before money can be paid out.
So make sure your knowledge in this area is fresh and up to date.
A good place to start are life insurers’ websites, or you could revisit your study materials from your Diploma in financial advice. The LIBF’s DipFA is perfect for this.
For life cover policies that include critical illness, you will need to use a discretionary split trust.
This is a flexible way of making sure that a client’s specified beneficiaries receive the life cover payment should the worst happen and the life assured dies.
However this cover is retained for the client’s own benefit if they suffer a critical illness.
The trust is flexible and will allow your client to choose a wide range of beneficiaries as well as to add more beneficiaries once the trust is set up.
A holistic approach
One explanation for the continued fall in people taking out protection cover could be related to the mis-selling scandals of recent years and the popular myth that insurers don’t pay out.
This is of course untrue. According to the Association of British Insurers (ABI), in 2018 insurers paid out an average of £13m each day for individual life, critical illness and income protection insurance claims.
The ABI also found that 97.8 per cent of all individual claims were paid out in 2018.
In cases where policies couldn’t pay out, the most common reason was inaccurate or non-disclosure of information by the customer, for example, social smokers who think of themselves as non-smokers when filling out their critical illness forms.
So how do you, as a financial adviser, make sure you’re able to guide your clients appropriately?
First, it’s important to see these issues as part of the broader mix of pensions, investment, savings and preparing for all eventualities – both in the markets and in an individual’s personal circumstances – and how they might change.
