Building a sustainable income with income protection

A sustainable income is an important requirement of maintaining a functioning household that can maintain regular commitments and outgoings, but there is nothing more sustainable than an income that is protected against the unexpected.

A young family reading together
"Unlike some long-term insurers who tend to publish their claims statistics and the value is better understood, the ASU providers have not done much in this area and Best Insurance is committed to sharing regular claim statistics to further demonstrate the value in investing in an ASU policy."

Income protection insurance provides protection against unexpected loss of income due to accident, sickness, or unemployment (ASU). It is one of the most comprehensive types of income protection one can buy.

Also known as 'short-term' income protection, these policies cover up to 65% of gross monthly income, the claims payments are tax-free, no deductions regardless of any benefit claimed from the Government, the benefit amounts will be paid straight to your client and there are no restrictions on how the money is spent.

For many people, the loss of a monthly salary would severely impact their ability to maintain their regular commitments such as mortgage or rent repayments, utilities, groceries and more. With income protection, your clients will still be able to cover their essential outgoings and more, they do not have to deplete their savings, or rely on government benefit schemes like Job Seeker's Allowance or Statutory Sick Pay.

Undisputed value in ASU policies for our customers

Several customers tend to focus on buying insurance for all types of risks – home, motor, travel, pet etc and the one thing i.e. their income that allows them to enjoy their lifestyle sometimes get ignored.

Our research shows that often the reason for not having income protection insurance comes down to awareness. Once customers understand the value such policies provide, it becomes one of the most important insurance policies they tend to maintain for a long period of time.

Our experience shows that when the customer understands the value and the ROI on investment on such policies, there is little reason not to buy an ASU policy. A typical policy that pays a monthly benefit amount of £1,000, costs about £40 per month. Simple maths show that even if the customer were not to make any claim for the next 10 years and then makes a claim which gets paid for the duration of 12 months, the ROI is a whopping 250%. Given the current Bank of England interest rate is near zero and is expected to stay the same or go further below, it is hard to find investment areas that promise to pay such a handsome return. All we ask our customers is to set aside about £1/day to buy this peace of mind.

Claim's statistics

Unlike some long-term insurers who tend to publish their claims statistics and the value is better understood, the ASU providers have not done much in this area and Best Insurance is committed to sharing regular claim statistics to further demonstrate the value in investing in an ASU policy.

Contrary to a common view that ASU policies are mainly for unemployment, accident and sickness claims tend to be nearly 40% of the claims paid out. The top five reasons for claims tend to be redundancy, closure of business, stress & mental health, back & neck, and accidents. Our claims information shows that the youngest person to have made a claim was 26 years old and the oldest being 63 years old, the average being 45 years of age. There is a bias towards more male claimants than female and 67% claimants were male. The smallest claim amount till date has been £33 and the largest claim was £30,420. The claims process is another area wherein Best and other ASU providers are continuously improving to ensure that the customers have an efficient experience.

Sustainable return for advisors who sell ASU policies

It is important to ensure that selling ASU worthwhile is worthwhile for advisors. After all, the reality is they have finite time with each customer, and they have to provide the right advice and maximise their income potential.

One of the common misconceptions is that the commissions from ASU policies are not as attractive as other protection products such as life insurance, critical illness cover etc. There is a lot of truth in this paradigm when just the initial indemnified amount is compared. However, when the income potential from selling ASU policies are compared correctly, most advisors are pleasantly surprised with the true income potential ASU policies provide.

Unlike several other protection policies, the commission for ASU policies is paid until the very last day the customer pays their premiums. The average duration that a customer maintains their ASU policy is about seven years. Taking into consideration, the same premium of £40.00 per month and considering sale of just one policy per week, the sale would generate commission incomes of £5760.00 in the first year. If this continues for the next seven years, the commission value over this period will be about £161,000. The valuation to the business even at a simple multiple of 5x would mean this will be worth nearly £800,000. All this for selling just one ASU policy every week. Obviously if you sell just two policies every week, you will be building a book worth more than £1.5 million in valuation terms.

Sold correctly, the income from ASU will be a massive business value enhancer and bring in the much-needed blend of recurring commissions, which will enhance the overall sustainability of your business.

About Best Insurance

Best Insurance is one of UK's largest providers of Accident, Sickness and Unemployment Insurance. We have a several types of policies from a wide range of insurers. For the past decade, we have been continuously refining and improving the product benefits, enhancing eligibility, making it easier for brokers to access and submit applications.

It's time to start selling ASU – available soon via Synaptic Webline

To take advantage, register your agency with Best Insurance by visiting https://adviser.bestinsurance.co.uk/registration-form

For more information and to get your agency set up, please call Best Insurance on 0330 330 9465 or email info@bestinsurance.co.uk