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Handling common objections

Who can my client turn to if they can’t work?

When asked what would happen to their finances if they were off work ill, a common client reaction is ‘I’ll get by’. But can they really?


Chris sat looking at the camera

Chris Nicolaou shares his tips and advice on how to handle common client objections against taking out income protection, including: 'It won't happen to me".

What do they spend?

Pound sign with arrow pointing out

The family average monthly spend totals a whopping £2,292. One of the first things anyone should do when considering their financial situation is to run through their household budget. Get your client to run through their household budget with a budget planner – when they write it down, the reality starts to hit home.

I’ll tighten my belt, or rely on my partner

Two stick figures stood together

The average UK family spend is £2,292 a month – can your partner’s salary cover this over the long-term? The average length of an IP claim at LV= is more than seven years – a long time for your loved ones to cover your debt and bills.

It’s easy to assume they’ll help, but have you actually asked your loved ones if they’d bail you out in the future? They might support you for a short while, but would they fork out £2,292 a month (equivalent to the average monthly family outgoings)?

I’ll just dip into my savings

Money going into a piggy bank

The Money Advice Service (MAS) states that people should have three months’ of outgoings in rainy day savings. LV= Income Roulette research revealed that 37% of households don't meet this benchmark, with 38% having no savings at all. Only half the population have £250 or more in total savings. Showing just how unrealistic this option is for the majority.

If your client isn't bringing home the bacon, how long will their savings last? Even large amounts of savings can vanish in a matter of weeks if you lose your income. And that would be even more painful if you'd hoped to spend that money on the good things in life like a new car or holiday.

With the average family spending £528.90 a week* and only having £1,205 in savings** things can get desperate in less than six weeks.

Even large amounts of savings can vanish in a matter of weeks if you lose your income. Use a budget planner to calculate your monthly spend and divide that by your savings. How long would they last?

Source: *ONS, March 2016 **L&G Deadline to Breadline to report, 2014

I'll rely on my employer

Icon of a figure wearing a tie

Only 43% of employers offer sick pay above the minimum requirement (which is capped at just under £90 a week). As part of your preparations for a fact find meeting, ask them to bring along their contract of employment and sickness benefit statement.

If your client is the one of the near five million who is self-employed, they’re on their own.

We’ll cover up to 60% of your net profit if you’re self-employed. We understand self-employed income can fluctuate, so we’ll look at your last three year’s income when working out the maximum benefit payable at claim.

The state will help me

An icon of a figure sitting on the palm of a hand

The good news is that the state will give your client £89.35* a week for up to 28 weeks if they can't work due to ill health.

Not everyone is eligible for Statutory Sick Pay - it's only available for people who are employed. The bad news is that the average UK family spends £56.80* a week (in 2016) on food alone. That doesn't leave much for all the other monthly expenses.

What happens after the 28 weeks of Statutory Sick Pay?

After the 28 weeks and if your client is still off work due to ill health they could be entitled to Employment & Support Allowance. Unfortunately for them, they’ll need to navigate through a complex and lengthy application process – the Employment & Support Allowance (ESA) form runs to an exhausting 57 pages. They also have to undergo a stringent series of assessments about their ability to do any work – around a third of ESA applicants get some form of ESA benefit. For those who are ‘successful’, benefits provide basic support – the maximum ESA payment is now just shy of £110 a week (and under £75 during the assessment phase).

For more information on the full state benefits available to your client go to www.gov.uk.

* ONS, Feb 2017

I’ll take out credit

Hand holding a credit card

With interest rates at an all-time low, credit is easier to secure. UK households already hold an average of £13,000 in unsecured debt. Your clients might be able to eat into their credit card limit, but that wouldn’t go far for many… and they’re only rolling up heftier repayments and sinking deeper into a credit hole.

So, if your client or their partner were to be off work ill for a time, the prospects of ‘getting by’ seem bleak for many. But, help is at hand…

Income protection doesn’t pay

A document with a pound sign, with a tick against it

At LV= we always aim to pay claims where we have had a full medical disclosure. Usually the only claims we cannot pay are where someone hasn’t been entirely honest about their medical history or where their reason for claiming is not supported by the medical evidence provided when they claim.

But we go to exceptional lengths to try and prevent this from happening. In 2016 we paid 90% of all our Income Protection claims.

Check out the 7 Families videos for a reality check on the real risk of long-term sickness.

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FOR UK FINANCIAL ADVISERS ONLY
LV=, County Gates, Bournemouth, BH1 2NF, UK