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.
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