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Insurance is increasingly important to older clients

It’s always been fashionable to knock insurance, to say it’s too complicated, too hard to get, and too hard to understand. It also seems to have become cool to talk about getting rid of your insurance – as much a mark of financial success as getting rid of your home loan.

Tuesday, November 6th 2012, 2:03PM 6 Comments

by Russell Hutchinson

Martin Hawes, a respected commentator on trusts, was a recent proponent of this view. Of course, he’s not alone. In fact, even some clued-up insurance advisers adopt a similar tactic: acknowledging that insurance is unpopular they market reviews with the catch-phrase “Do you have too much insurance?”

But are they right?

If your financial life has become so simple that it entails no debt, and no responsibilities to those that you might leave behind, and you have sufficient resources available for final expenses then perhaps that is success of a sort – but a fairly limited sort, and not one which is actually that common these days prior to the age of 70.

Increasing numbers of people over the age of 65 are working. When you work you tend to have responsibilities that others will still want met even if you can’t work – hence life insurance, income protection, trauma cover and TPD. In fact, because of this one fact – a demographic shift caused by better and better life expectancy and quality of life – more and more insurers offer to age 70 benefits for IP, Trauma, and TPD.

Another social trend is towards second families, and extended families. Often grandparents are looking after the children of their own mortgage-slave children. Often reconstituted families are having children in their fifties – and will therefore have responsibilities into their sixties and early seventies. They may want those covered.

Other people treat ‘retirement’ at 65 as an invitation to take risks they never took before: starting their own business for example. Credit providers often require cover – however much they might be wrong for doing so, an assigned life policy is an easier and simpler instrument to work with than cash which the borrower assures them is available. Unless it is placed in something like a creditor protection trust, but maybe that’s what Mr Hawes wants you to do. After all, we’re all pushing our own barrow – myself included.

Another reason not to jump too quickly at cancelling cover is that it can be hard to obtain again later if your needs change.

In absolute terms, no longer requiring your life cover is a ‘good thing’ like becoming debt-free. In practical terms, even the most successful people continue to use a bit of credit here and there: and it is likely that will apply to life insurance too. 

« Peer Review: A powerful tool for building better risk recommendationsWhen does a life policy really expire? »

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Comments from our readers

On 7 November 2012 at 10:10 am Barry Milner said:
What many financial planners ignor or don't seem to appreciate is that when one of a retired couple (husband or wife) dies the government pension is slashed almost in half for the survivor, the same applies to many defined benefit occupational pensions. So the survivor's income is reduced, but almost all living expenses, rates, power telephone, running a car etc. etc; remain the same. A reasonable life insurance payout would certainly ease the burden.
Combining an amount of level premium life insurance with some on a stepped premium at an early age can provide an affordable solution to the problem of affordability as we get older. Level premium to age 80 is not the total answer now that more and more people are living well beyond that age, but there are several options available to carry level premium cover to 100 or even further. The secret of affordability is to start early enough, so it may already be too late for many to make the change in a meaningful way, but for those clients in their forties or even younger to include at least a portion of their total cover on a level premium is good and timely financial planning. Perhaps Martin Hawes and his like should re-think their position on the value of life insurance as a lifetime financial planning tool.
On 7 November 2012 at 4:20 pm Cancerned adviser said:
Russell you speak about what clients want and need. How many appointments have you been on? How many actual people have you advised on their insurance needs? How many insurance polices have you sold?
I have searched and can’t find you listed as a RFA or and AFA. Have I made a mistake or are you neither? But you obviously think you can offer us RFAs and AFAs advice on what to sell to our clients?
When did you become the expert on insurance? What insurance qualifications do you have to enable you to offer us this advice?
I often read your articles with disbelief as how can someone who has had no experience in selling insurance be able to offer advice to those who do? There are many Insurance company people who venture out into adviser land only to fail and go back to the corporate pay check. Unless one actually sells insurance, yes sell not just advise, I don’t think one can advise other advisers who do sell on what to do.

Your own website states the following...
“We do not offer any retail financial services advice. If you have come across this blog because that is what you are looking then you are welcome to read, but in order to obtain advice and / or assistance with your purchase then you should seek the assistance of an adviser.”
On 8 November 2012 at 2:31 pm Warren Duff said:
With over 50 years selling life insurance I have had scores of death and disablity claims, and funny enough not one single person has ever said the cheque is too much, it has been "I wish we could have afforded more."
On 8 November 2012 at 2:51 pm Paul Carrick said:
I concur with Warren, while people may think they don't need "insurance" anymore, there is still often the need for money which can be used without selling assets or using other funds which may not be available.
Useful tools are those people who still have Whole of life policies(that haven't been converted to age 65) and also Level life to age 100 for a modest amount of cover.
Russell, irrespective of whether you are/have been an adviser, your commentary brings out discussion and on the way through readers may start thinking about their strategies and if there are other ways to do things.
On 8 November 2012 at 3:01 pm Giles Thorman said:
To think that only someone who has actually sold Insurance is capable of writing articles aimed at advisers I find an incredible claim, "Cancerned (sic) Adviser". I have heard and read Russell Hutchinson for a number of years, whilst I do not always agree with him, he does write some thought provoking stuff that adds to debate within the Industry. I get tired of people writing diatribes behind a nom de plume where you do not give the person you are attacking the opportunity to respond. For all we know you penned the above in celebration of your second sale. If you find Russell's articles offensive or far fetched then I suggest you do not read them. I read Martin Hawes' article in the SST and I think that Russell has now added some balance to that OPINION with another OPINION.
On 9 November 2012 at 10:34 am Norm Waldon said:
Well said, Warren - I also agree with Giles. 'Cancerned Adviser', I was unable to find you on the list of RFAs and AFAs also - perhaps because you hide behind a nom de plume?

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