Covering The Gap – The Value Of Additional Benefits

A strong foundation

At FMI, we focus on providing holistic income protection solutions that respond to the individual needs of our clients. At FMI, we believe complete income protection requires a combination of temporary and permanent benefits. We further believe that the most important component of this solution is temporary disability cover as our research shows a person is more likely to suffer a temporary disability than a permanent one. This cover provides the cash flow necessary to protect the parts of that individual’s life that are normally covered by a monthly income (such as debit orders, bills, savings contributions) in addition to helping them maintain their lifestyle until you they able to return to work.

Once temporary cover is in place, we look at the individual’s permanent income protection needs. While the Life industry has traditionally focused on selling lump sum disability, we believe that a combination of monthly income replacement benefits (to replace the individual’s monthly income stream) and a once-off lump sum disability benefit (for debt settlement and once-off expenses) is the correct combination of permanent disability cover. You can read more about FMI’s approach to permanent income protection here. With a strong income protection foundation in place, the individual’s ability to earn their income (and sustain their lifestyle) is protected against the risk of disability.

Why additional benefits make good sense

As income protection specialists, we have come to understand that there are a number of disabling events that could cause serious financial strain, especially for self-employed clients. We have designed our additional benefits to meet these needs.

A word of warning – we believe that, before delving into additional benefits, it is important for our clients to cover 100% of their income need, with benefits that protect them against the major risks to their income – temporary and permanent disability.

Once the individual is covered in this way, there are events that impact on their ability to earn their income beyond disability such as a spouse falling ill or an unexpected retrenchment. FMI’s additional benefits have been designed to support the core benefits on offer and provide extra protection for the individual against risks that might affect their ability to earn their income. These benefits include the Spouse Protector, Child Protector, Death Income Benefit, Retrenchment Protector, and the Retirement Extender. All these benefits offer value in the income protection space.

The Death Income Benefit is a good example. When Elmein Pieters’ husband, the family breadwinner, passed away from cancer this year, she was able to claim from his Death Income benefit, an additional benefit to his Temporary Income Protector. She will now receive his monthly temporary income protection cover amount for the 6 months following his death – a crucial time during which his estate will have to be finalised before any money is paid out to his beneficiaries. For Elmein, ““This kind of cover is definitely important. Life is so short and you never know what is going to happen. It’s important to have an insurance plan in place, especially if you have children to support.”

While clients should have Life policies in place, this additional benefit covers the inevitable income gap between the death and the Life policy paying out. It delivers a set amount every month to chosen beneficiaries, for 6 or 12 months, without a waiting period, and no aggregation. This kind of cover can be critical during the period the beneficiary is waiting for the breadwinner’s estate to be finalised.

Getting the balance right

There are a number of insurers in the market currently offering omnibus policies that claim to cover everything. With these policies, the additional benefits are positioned as the draw card, rather than the ‘addition’ they should be. Where additional benefits are offered first, the pay-outs can come up massively short of what the self-employed client really needs when they claim.

When deciding what your self-employed clients need in terms of income protection, it is important to establish the robustness of their reserves if any disabling event would stop or significantly reduce their income. How long could they meet their cash flow demands in the case of a disability? Or if something were to happen to their spouse, child, or business? That process should include a holistic assessment of the events which realistically fall into that category and conclude with a selection of benefits that ensures the client is effectively covered when it comes to their income. And, this is a process that should be repeated at regular intervals as the policyholder’s needs and circumstances change over time.

Special offer!

We are currently offering our existing policyholders the chance to add to their cover with our comprehensive lump sum disability offering and/or our Death Income benefit. Click here for more information of this special offer or contact the Financial Adviser Distribution Team on 0860 10 52 08 or [email protected]