Consumers often struggle to distinguish insurance fact from fiction. Protection products are complex and policies can be technical. We look at the top five insurance myths you might hear from clients and how you can debunk them.
1. It’s not worth the money
Nobody likes having extra bills to pay. However, the Covid-19 pandemic has brought home to many why financial protection is important.
Clients need to think about what might happen if they become unemployed, can’t work or – in the worst case scenario – lose their life.
The right insurance policy could make the difference between a family keeping their home or losing it.
If you have the right protection in place, the premium should be affordable and well worth the protection the policy provides.
2. You don’t need life cover if you’re young and healthy, or not the highest earner in a household
Sadly – as we’ve learned through the Covid-19 pandemic – life is unpredictable. Tragedy can hit even the young and healthy.
If you have caring responsibilities for children or adult dependents, your life should be insured.
Without insurance, your loved ones could face unexpected bills – including funeral costs – and may struggle to afford to stay in the family home.
3. If you make a claim, the insurer will try to wriggle out of paying up
The Association of British Insurers (ABI) reports that 97.8% of all individual claims were paid out in 2018 – an average of £13m each day for individual life, critical illness and income protection insurance claims.
In cases where policies couldn’t pay out, the most common reason was inaccurate or non-disclosure of information by the customer. For example, a social smoker who only has the occasional cigarette may tick the ‘non-smoker’ box when applying for life cover.
This is why consumers need protection advisers to spell out the small print.
4. Legally you have to take out life insurance when you get a mortgage
For most people, their mortgage is the biggest financial obligation of their life. You’re not obliged to take out life insurance – or even mortgage protection – but it’s worth considering.
To put things in perspective, the average outstanding UK mortgage debt was £131,724 at the end of 2019. But only half of the 10.96m households with mortgages had life insurance – leaving many vulnerable to potential homelessness should the worst happen.
5. There’s no difference between life cover with terminal illness benefit and a combined life and critical illness policy
There’s a big difference.
Customers need high-quality protection advice to get the right cover for their circumstances. And – as an adviser – you need to be confident that you can give them that advice.
How to debunk insurance myths
Protection is complicated. And, looking at the myths surrounding life cover and mortgage protection, it’s clear there’s still lots of potential for policies to be mis-sold.
At the moment there’s no requirement for protection advisers to be regulated or qualified.
But having a dedicated qualification – specifically tailored to the mortgage advice industry – could give you, and your business, the edge.
Find out more about our Level 3 Certificate in Protection (CertPRO)