Linton Penman, head of retail marketing for IP provider Unum, said that state benefits only really helped those on less than £20,000 per year or with over £30,000 in savings. He said advisers must do more to help protect their clients, as benefits were not means tested and were a static amount.
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The government’s reforms are due to be implemented next year and Penman said not only would it become harder to claim benefits, the amount an individual can claim would be cut and there would be a greater responsibility on people to get back to work.
He said: “The more you earn, the more you have to lose. Only 12 per cent of the working population have IP, because advisers don’t talk about it. A lot of people are unaware of it, yet would be more than happy to buy it. IP is probably the best financial product people could have, but advisers think it’s too difficult and expensive. It doesn’t have to be more difficult than mortgage payment protection and is often more suitable. The risk of suffering a long-term illness is higher than some might imagine, as one in six people will suffer a long-term illness.”
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The protection gap in the UK is currently estimated at £2.6 trillion.
Payam Azadi, head of marketing at Mortgage Times, commented: “If lowered benefits raise the issue of the protection gap, it will be good. We have to create more dialogue about why and when people should have protection. However, advisers need to look at the product as part of a holistic review of their client’s requirements.”
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