How does Protection Work?

Below you will find some real-life clients we have helped..

Case Study 1 - Income Protection

Mrs H was a divorced mother of one who we first met when she needed a mortgage to buy a house for herself and her son to live in soon after her divorce.  She worked as an administrator for a company selling office equipment and was well regarded by them.  Consequently, she felt secure in being able to enter into a mortgage which we were only too pleased to help with. 

As part of our holistic advice that we offer we also spoke to her about protection and one of the protection plans we discussed was income protection.  This plan would provide benefit to her if she suffered from a long-term illness or was off work for a long period due to an accident.  We discuss this with all of our clients and it’s fair to say that the vast majority of people feel that it’s never going to happen to them and they decline the suggestion to take up this type of protection and there is a misplaced belief that the state will offer sufficient benefit to them if they hit troubled times and cannot work because of illness.  Unfortunately the state’s safety net has some rather large holes within that net that many people fall through. 

The good news is that this lady decided that she would take out advice and take out the income protection plan and, as bad luck would have it, after a number of years she developed cancer.  Fortunately, she survived the illness and after a few years of treatment she was able to return to work full time but in the interim she had had the benefit of a tax-free income being paid to her which was sufficient for her to maintain her mortgage payments, her utility bills and feed herself and her son.  It is not an exaggeration to say that without this policy she would not have been able to pay her mortgage, she would have lost her home and the impact that such a devastating turn of events would have on anybody would have certainly set back her recovery and may even have made it worse.  For this lady, this little policy was truly a life-changer and given that the state is only likely to give you £                    per week for long-term illness, can anyone afford not to have an income protection plan?

Case Study 2 - Waiver of Premiums

Back in 1997, and I remember the year very well and indeed the date – it was the autumn of 1997, and I had gone to see a client in Suffolk to discuss his pension planning.  He was a self-employed man and he was able to contribute a reasonable sum to his pension of £10,000 per annum as his business was doing quite well at the time.  I dealt with the paperwork with him and collected the first years contribution and left.  The next day, Mr Michael Fish went on television to announce that there wasn’t going to be a hurricane and we all know what happened next and if I had delayed seeing my client the storms would have prevented me getting there as a massive tree had blown across the lane to his house and, life being what it is, it may be that we would never have got the paperwork completed.

I added to the plan an option called Waiver Of Premium benefit which meant that if Mr               was ill then the premium would be paid for him until he returned to work.  Regrettably, Mr                developed leukaemia and he never ever did return to work although he was fortunate enough to survive into pensionable age.  Because of the Waiver Of Premium benefit the insurance company that we had set his pension up with continued to pay £10,000 per year for many years into his pension plan so that at the age of 65 he had a goodly sum for which to purchase a pension for him and his spouse.  The cost of this benefit for my client was 2% of the premium and he got tax relief against it and he only paid two premiums.