+ + Friends Life Protect+ Income Protection Objection Handling Toolkit. For advisers only. Not for use with customers. Friends Life Protect+

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1 For advisers only. Not for use with customers. Friends Life Protect+ Contact us Welcome Your policy is on risk Medical underwriting Completing your policy Claims management Employer and Employee Assistance Frequently asked questions Who to contact + + Friends Life Protect+ Income Protection Objection Handling Toolkit

2 Introduction When discussing income protection cover, your clients may have different reasons why they believe they do not need protecting. This objection handling toolkit is designed to help you overcome different objections, to help ensure that your clients who have a potential need for income protection understand the value it can add.

3 Money machine Cost of insurance There may be good reasons why your client s budget will not stretch to income protection cover. However, in some instances it may be that your client does not understand the real need to protect their income and the value that suitable cover could bring in the event of illness or injury. Money machine If your client had a machine in their house that paid out several hundreds or a thousand pounds a month, would they pay a small amount a month to insure it against loss or damage? Probably. The machine is your client as they generate the income.

4 Money machine Cost of insurance Insurance product costs Your client may already be paying out money for different types of insurances. However, have they considered how much financial support they would need if their income stopped due to illness or injury? Many will insure their cars, their push bikes, their mobile phones and their pets. In the table below, the Friends Life Income Protection premiums are based on 12,000 a year benefit, 6 month deferred period, non smoker, class 1a occupations, insured to age 65. To put the costs of income protection into perspective, here are the average annual costs for some insurance products, taken from Mintel research carried out in 2013: Individual private medical insurance > 1,800 (1) Buildings insurance 201 (2) Contents insurance 104 (2) Age 25 Age a month ( a year) a month ( a year) Source: (1) ABI / Mintel (2) AA British Insurance Premium Index Age a month ( a year) Without their income, or a replacement income, some of the items they currently insure such as their car or their mobile phone could all fall into insignificance and how would they continue to pay the premiums for their existing insurance? It s often sensible to insure the goose, as well as the eggs.

5 for that amount of time My client will not be off work Many clients believe that being long term sick from work simply will not happen to them. However, the statistics speak for themselves. It is a real possibility. Long term sickness statistics In the UK, there are people suffering every day with an illness or injury some are forced to take months, even years off work. Each week 1 million workers take time off work because of sickness Around 17,000 people reach their sixth week of statutory sick pay 1 in 5 will never return to work Source - Heath and Safety Executive Report 2010 Page 1

6 Protection claims NHS doctors sick pay Median length of income protection claims Many clients are able to return to work within a year or two, for some it takes much longer, and for others they may never be in a position to return to work. The median length of a Friends Life Income Protection claim is seven years. When it comes to sick pay, what someone will receive will vary greatly between firms. How many of your clients even know, whether or not their employer would help out? A simple question to their HR department will give them a clear picture of the help their employer would provide. Median sick pay at full pay Public sector 26 weeks Median sick pay at full pay Private sector 8 weeks Department of Work and Pensions Health at Work Report Statutory Sick Pay Clients who receive no benefits from their employer, are only entitled to Statutory Sick Pay. The minimum an employer has to provide following 3 continuous days of sick leave is a week, for up to 28 weeks.

7 NHS doctors sick pay Protection claims NHS doctors sick pay If your client is a NHS doctor, they will have sick pay arrangements in place through the NHS. However, they will not receive full NHS sick pay entitlement until they have been employed for five years. Friends Life Protect+ can provide NHS doctors with a replacement income starting as soon as their NHS full sick pay ends. Full pay entitlement Half pay entitlement When is six month deferred benefit income protection paid? When is 12 month deferred benefit income protection paid? Under one year One month Two months From month two onwards From month four onwards Between one and two years Between two and three years Between three and five years More than five years Two months Two months From month three onwards From month five onwards Four months Four months From month five onwards From month nine onwards Five months Five months From month six onwards From month eleven onwards Six months Six months From month seven onwards From month thirteen onwards

8 Realistically how long will other people be able to, or want to, support your client? 35 percent of couples with children have no savings set aside for an emergency. Many people would not be in a position to help. Handouts, no matter how big or small, are not likely to be long term, and are not likely to keep your client in the lifestyle that they are used to. How long could your client support their family if the situation was turned on its head? 35% of couples with children have no savings 0% 100% Source - Page 75

9 The state ESA Higher earners You should discuss state benefits with your clients, as many will be unfamiliar with what the state could potentially provide and what issues they might come up against. The state provides a number of benefits to support your client s monthly expenditure. In the event of illness or injury preventing them from working. Employment Support Allowance (ESA) is one of these benefits. If your client has made enough National Insurance contributions they will be able to apply for the non-means tested version of ESA. If they are awarded the benefit, unless they are deemed unlikely to ever return to work, the benefit will only be paid for 12 months. They will then have to reapply for the means tested version of ESA. Non-means tested benefits, like Personal Independence Payments, tend to be paid where a client has additional expenditure arising from an illness e.g. a carer or specialist equipment. Means tested benefits tend to support more general living expenses like food, rent or children. Because these are assessed on the household income there could be a high degree of uncertainty as to what a client might receive at any given point in their life. As a general indication, having children increases the level of eligibility whilst having a partner in work or savings could reduce and even remove any eligibility (even if there are children in the household). Whilst having an income protection payment will reduce a client s eligibility for means tested state benefits, income protection provides a level of certainty that state benefits do not. Your client is sure of how much they will receive and under what circumstances it will pay out. The same can not be said for state benefits.

10 The state ESA Higher earners Employment and Support Allowance (ESA) Unlike income protection, ESA is not designed to provide your client with a replacement income. Even the maximum weekly benefit would only really meet the needs of someone living quite a basic lifestyle. Assessment phase (first 13 weeks) Under age 25 Over age 25 Then... Work-related Activity Group Support Group How much? Up to a week Up to a week How much? Up to a week Up to a week Source - Means tested state benefits are not guranteed Having children could increase the level of state benefit your client is entitled to. But, personal circumstances such as the following could reduce any benefit available: Partner s income/hours worked Savings Pension income State benefit allowances are calculated by household. The cap on means tested state benefits limits households to a maximum of 500 per week. source - ESA claims 650,000 people a year make an ESA claim But only 300,000 are successful and actually end up receiving health related state benefits* Over one third of people claiming ESA have been doing so for over a year** *2011 Health at Work Report. **Source - Page 65

11 The state ESA Higher earners Own occupation benefits With Income protection many clients are protected under an own occupation basis for these clients, if they are unable to fulfil their own occupation the income protection benefit will pay out. With ESA your client is evaluated on their ability to do any type of work, not just the work of their own occupation. State benefits and higher earners The financial implications of being long term sick from work are just as applicable to a higher earner. With people tending to live within their means, the loss of an income for a lengthy period of time could have a serious affect. If your client loses their income due to illness or injury, income protection would provide a guaranteed benefit, regardless of their personal circumstances. And because of the size of their salary, it would provide considerably more benefit than what the state can offer. Gross annual earnings Approximate net annual earnings (less tax and National Insurance) Annual income protection benefit Maximum state benefit personal circumstances will be taken into consideration and may considerably reduce the benefit available 150,000 90,100 83,500 26, ,000 75,500 69,750 26, ,000 65,100 56,000 26,000 75,000 50,600 42,250 26,000 50,000 36,100 28,500 26,000

12 Income protection is designed to protect your client s earnings throughout their working life. If at any point they suffer an illness or injury, which stopped them from working, your client would still have some form of income until they are medically fit to return to work or they reach the end of their benefit period. This is in contrast to Critical illness cover, which pays a cash lump sum should your client suffer one of the illnesses covered by the policy. The most common income protection claims are for mental health issues and muscloskeletal conditions. Whilst these conditions can stop your clients from working they are unlikely to trigger claims payments from Critical Illness cover. Mental illness In percent of our new income protection claims were for mental illnesses such as stress and depression. Friends Life Individual Protection Claims Department Depression is a common condition. It affects nearly one in six people in the UK. Source - Musculoskeletal conditions In percent of our new income protection claims were for musculoskeletal conditions such as back injuries. Friends Life Individual Protection Claims Department Musculoskeletal conditions can be caused by a number of different reasons, for example back pain and osteoarthritis. Back pain is one of the most common reasons for people to consult their GP and also one of the most commonest causes of both short and long-term sickness absence. In many cases the precise cause will not be clear at outset and they ll often be labelled as having mechanical back pain. Symptoms include pain, stiffness and difficulty with activities such as bending or lifting which could last for an indefinite period. The longer someone is absent from work with back pain, the less likely they are to make a successful return. Early intervention is therefore key to try and assist a customer getting back to work before a disability lifestyle has been established. Source - There are different degrees of depression, but severe forms of depression can make daily life extremely difficult and affect a person s ability to work.

13 For more information, please contact us on: Friends Life Individual Protection, PO Box 569, Friends Life Centre, Bristol, BS34 9FE Calls may be recorded and may be monitored Friends Life and Pensions Limited An incorporated company limited by shares and registered in England and Wales, number Registered office: Pixham End, Dorking, Surrey RH4 1QA. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Telephone calls may be recorded. Friends Life is a registered trade mark of the Friends Life group. FLIP/7164 Oct 14 (44759)