30 November 2019
RISK
Why risk planning should start with Income First
Y
our clients’ income is so much more than just their monthly salary – it’s what supports their plans for today, and their hopes for the future. If their monthly income has the potential to provide for all their financial needs, why doesn’t risk planning start here? Life insurance is intended to insure South Africans against all major risks, but the majority of product solutions sold are not designed to meet this need sufficiently. Advisers typically default to insuring their clients against death and permanent disability with lump sum benefits, instead of insuring them against their most likely risks such as injury, illness, and critical illness. As an adviser you have a prime opportunity to positively impact your clients’ future, by recommending cover that will protect their ability to earn an income. The best solution is to start with a benefit that will replace your clients’ monthly income if they’re unable to work due to injury or illness. This product philosophy, coined by life insurer FMI (a Division of Bidvest Life Ltd) as Income First, is effective because it replaces 100% of a client’s hardearned monthly income when they’re faced with such unfortunate circumstances, in turn delivering on the basic customer need for which life insurance was designed in the first place. As South Africa’s fastest-growing life insurer*,
FMI is proving that the Income First approach Income benefits mimic the income stream promises better value for your clients: you are trying to replace when planning for an Better cover, with more chances of claiming for unexpected risk event. This should be easier to your clients. Adding income protection for injury explain, and therefore easier to sell. and illness protects your clients’ monthly income They also make policy servicing and annual against their most likely risks. The numbers speak reviews simpler. As an adviser, you simply need to for themselves. According to FMI’s 2019 Risk Stats, asses any lifestyle changes and update your client’s a 32-year-old male has a 91% chance of having a policy to match their latest monthly income to temporary injury or illness during their working ensure they have the correct cover. career, and a 37% chance of experiencing a critical Income benefits mitigate investment and inflation illness. risks too – your clients do not need to worry about Save your clients’ money investing a lump sum of money, on premiums or get more and the future impact of inflation, cover for the same spend. The in order to produce an income. RISK PLANNING Income First approach means And finally, income benefits are STARTS WITH you can rethink the balance proven to support significantly PROTECTING between income and lump sum reduced lapse rates. According to cover solutions. On average, FMI, lump sum benefits are 66% CLIENTS’ ENTIRE income benefits have proven a more likely to lapse in their first FUTURE INCOME 20% premium saving; and not year, compared to income-only just today, but over the life of a benefits1. policy. You can either invest the savings or keep The future of the long-term insurance industry the premium at what it was but give your clients belongs to ‘early adopters’, those who appreciate more cover or better claims terms, such as adjusting that risk planning starts with protecting their cover to a shorter waiting period. clients’ entire future income, from the day they Taking the Income First approach doesn’t just start working until the day they retire. provide a superior product that meets customer’s 1 needs, it also offers advisers advantages at every FMI 2017 Lapse Report *NMG 2018 Q4 Results: subject to participating providers stage of the process, says FMI.
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