Nobody relishes the challenge of telling new parents they need to take out cover in case they or their children become seriously or critically ill, let alone mention the D-word.
But while death and illness are "emotive" topics, it is vital to have these conversations with clients, says Alexandra Loydon, head of engagement and consultancy for St James's Place.
This is all the more pertinent given findings earlier this year from the Financial Conduct Authority. Its Financial Lives survey 2024 found 32 per cent of UK adults do not feel financially resilient, with 22 per cent stating they could not personally cover an unexpected £500 bill.
Should the main breadwinner be unable to carry on working and earning an income, household savings can quickly be eaten up.
Loydon comments: "Protection, whether income protection or family income benefit, is not always considered by households, and parents often do not prioritise.
"Protection seems to be an additional cost, and not always positioned properly in conversations, but families are running an enormous risk by not having cover."
Even if the main breadwinner is healthy, they may have to stop working, or change their hours, to care for a child or partner who does become ill.
Income protection, critical illness and life insurance are therefore vital weapons in the financial advisers' armoury in the battle to protect people's financial resilience.
No lies about Fib
But there is another string to the bow, which can be cheaper and more flexible than life insurance: family income benefit.
Neil McCarthy, chair of the Protection Distributors' Group, says: "Protection is traditionally seen as covering areas like mortgages and debts, but family and children are sometimes overlooked.
"The financial burden of private education, which is very topical at present, can be very expensive – not just the school itself but all the added costs – and while you may have someone in mind to care for you children if needed, would that person have the financial capability to do so?
"The same applies to university education and we have often found that when this subject is raised, parents realise that insurance to cover these circumstances, such as Fib, is a very sensible idea.”
This is where Fib comes in. In a nutshell:
- It provides financial protection for a family during a set term, by paying out in ongoing monthly payments (instead of one lump sum) if the main breadwinner or the main carer passes away.
- Payments run from the day a claim is accepted until the end of the policy term.
- Payments are tax-free and can help to replace the breadwinners' income so the family can maintain their current living standard.
- The amount of cover can remain fixed (level) or increase each year in line with the retail price index inflation.
It works like term-based life insurance, and often the premiums are comparable (depending on individual circumstances), but instead of paying out all at once in a lump sum, it pays out the benefit every month for the remainder of the set term.
For some clients, this regularity might be more suitable, for example if the beneficiaries would prefer to have a set budget to manage each month, rather than be tempted to use up the whole lump sum on other short-term needs that might present themselves.
Naomi Greatorex, managing directorfof Heath Protection Solutions, says Fib is "central" to the advice she and her team give when it comes to family protection.
She says: "When talking to clients with children, Fib is central to any advice for family protection. Fib gives peace of mind to anyone with children, that they can protect their loved ones, should the worst happen, and a parent dies.
