Aviva & Downton Abbey

Thursday, 22nd September 2011 13:11 - by Resident IFA

I'm sure that I was not the only red-blooded male who eagerly tuned-in to the new series of ITV's 'Downton Abbey' on Sunday night. I was? Oh, never mind. As an Independent Financial Adviser (IFA), my ears pricked up when the ad breaks arrived. Aviva sponsor the main drama, creating their own mini-drama concerning Income Protection (IP) insurance. Income Protection insurance is the most criminally under-subscribed to insurance in the UK, in my humble opinion. Aviva's approach was clumsy, crass, and borderline patronising...but fantastic in that they took the 'brave' decision to promote this area of insurance in the first place. They could have taken the easy route and rolled-out one of the many guises of Paul Whitehouse to flog Car or Home insurance. Income Protection insurance simply provides an ongoing income in the event of longer-term illness/disability/incapacity. Some of the key facts: - You can usually protect up to 66% of your gross income. - Any benefit paid is tax-free. - Part-benefit can be paid in certain circumstances i.e. you are able to resume work part-time. - IP policies have a selection of deferred (waiting) periods before benefits can be paid. - These are usually 1, 3, 6, or 12 months. - For example, a self-employed person with no income back-up might be better off seeking a 1 or 3-month deferred period, whilst an employed person with (say) 3 or 6 months sick pay might opt for a 6 or 12-month deferred period. - Understandably, premiums rise for riskier occupations and/or shorter deferred periods. - IP policies are underwritten in terms of health, lifestyle, pastimes, etc. - IP policies will pay benefit until the earlier of return to work, death, or policy expiry (usually written to your preferred retirement age). In the UK, people tend to gravitate towards life cover and critical Illness cover. These are simpler to understand, providing lump-sum benefits. They also link handily to such as Mortgage debt, thus being more familiar to most of us. I often equate the cost of Income Protection with the cost of, say, your Sky subscription. A lot of people willingly pay in excess of £50 per month to watch the latest American drama or live Premier League football, yet this will not replace their income. A similar amount of money paid out each month could protect your income. Quite a few of us insure such as our phones and electronic gadgets too...why not insure yourself? Your fancy, widgety phone will not spew out £20 notes if sickness comes knocking. Like a lot of things, this comes down to education. The industry I work in needs to promote a far better understanding of IP insurance. If we are effective in this, Sky might just come a little further down the list of priority payments each month. Until next time...