Kathryn:       Hi everyone, this is episode 11 of season four and it’s the final episode of 2021.  Today I’m going to be talking to you about how age can be quite a big factor when it comes to applying for insurances.  So this is the Practical Protection Podcast.

So everybody, today is going to be a shorter podcast.  I think it will, it depends on how much I witter on for!  But it is just me today, giving Roy and Matt a nice little break and then we’ll be starting all afresh in 2022, with our season five.  So today is a bit of request podcast actually, Settle Metter from Openwork contacted me a little while ago and said he was quite interested in sort of how age can potentially influence an insurance application.  One of the things that we often say to people is, “Always a really good idea to sort of get insurances, obviously whilst you are probably a bit younger, whilst obviously you’re hopefully not having sort of like health conditions or the risks that might be influencing the premiums.”  And I think we say these things but we don’t necessarily lay it out in terms of actual figures and pricing.  It’s kind of like a case of well, people say that, but is that actually how it works?  So I am afraid that today is a little bit of a numbers podcast and I’m going to try and make it as non-number-y as possible because I think there couldn’t be anything more boring than me just sat here wittering about premium amounts and ages to you!  So I’m going to try and – yeah, try and make it a bit more fun than it hopefully sounds right at this moment.

So what I’ve done is, I’ve taken a few different situations.  So I’m going to be going through prices for life insurance, life and critical illness cover, whole of life insurance and income protection, just to show how pricing does change and I’ll be honest and say with some of these, as people get older the pricing does change quite a lot.  But then also to say at the same point it does, but with some of them it maybe doesn’t jump up as much as you think.  So if some people are thinking, “Well, I’m now at this age and I probably shouldn’t go for insurance, it’s going to be so pricey,” I’m hoping that this will also sort of like demystify some of that side of things.

So, I’m going to start off with the life insurance aspects.  So, everything I’ve done so far on these premiums and everything is based upon somebody – as I say, I’ve gone by age obviously in terms of the insurances that I’m looking at because it is personal protection.  I do apologise for this little rattle there, Fudge has just decided to come in with a little bit of a rattly thing to give us some nice – I’d like to say a bit of a Christmas jingle to the podcast.  So, obviously gender doesn’t come into play in terms of the pricing because we’re talking about personal insurance.  It would be different if we were talking about some other insurances.  With all of these, just let’s assume that everybody has a BMI that’s in the ranges that are absolutely fine for insurers to consider, that there’s no specific risks when it comes to health or occupation or anything.  I’ve also done everything based upon guaranteed premiums.

Now, for people who are listening from the advisor world, I think there’ll be a mix of sort of like – with some of these options, is it better to do guaranteed or reviewable premiums?  I generally work as an advisor from the view that guaranteed premiums are best in most situations.  I won’t say every situation, but in most situations they are best.  It means with guaranteed premium we’re locking the premium in place at that point for the remainder of the policy.  And obviously, reviewable premiums do exactly as you would expect. They will review.  I’ve also – if there’s been any options – because you can also – and I’m going a little bit into technicalities here, but you can get guaranteed age-banded premiums.  I’ve not gone for those either.  So the ones that I’ve gone for are the ones that that is the price and that will be the price going forward for the whole duration of the policy.  As I say, there are arguments sometimes for doing it other ways, but this – to be honest, there’s just so – there’s only so much I can talk about these figures and these numbers in this podcast, before you all go to sleep, so yeah, we’re keeping it as simple as possible today.

So with life insurance – again, I’m not going through the whole thing of like, this person has come to me and they need to have this amount of insurance or anything like that, we’re just purely going to be talking about some basics, just really basic examples of what the pricing is.  So let’s go for life insurance to start off with, okay.  So we’re just going to go for £250,000-worth of level life insurance to somebody’s retirement age.  I’ve chosen a retirement age of 68.  It does get tweaked ever so slightly as we go along, but I will speak up when that happens.  So £250,000, it’s quite a usual amount of sum assured for somebody, you know, we’re covering their – often a lot of people’s mortgages are near that level, or a bit less, or potentially even some family protection.  So I thought that was quite nice – quite a nice number to – I just like the number 250,000.  I think I’ll just go with that, let’s just say that.  So what I want to start off with is saying, ‘Right, so I’ve got somebody who’s 21.  So somebody’s 21 and they’re wanting this amount of cover, £250,000 level life insurance to age 68.  So, you know, it’s going to last a good amount of time for them.  So if somebody takes that out at the age of 21 and they lock that premium in place now, the guaranteed premium is £9.68 per month, all the way to the age of 68.  So when they’re 58 it’s going to be £9.68, when they’re 67 and five months, it’ going to be £9.68 per month.  So, you know, it’s not out of the realms of being obviously a premium that people wouldn’t necessarily want to pay, it’s less than £10 a month, you know, to make sure that you’ve got all that insurance there for your family, for your loved ones.  It’s quite reasonable.

And then we start looking at somebody who is 31.  So we’re 10 years older now, okay again and this is probably, I think, an age where a lot of people start to really want to consider insurances, because this is like the real age of sort of like, right, okay, we’re getting mortgages, we’re starting families, grown up thing is that I need to get some life insurance in place.  And at that point, the same amount of cover ends up being £14.04 per month.  So again, not completely, you know, we’re less than £15 a month, so I’m not going to try and do the maths on that very quickly in my head but, you know, a very small amount of money every day, to be able to have this amount of insurance.  And again, all the way up, even 67 years old and nine months, it’s still going to be £14.04.  And just to go a little bit quicker then, so for someone who’s 41, the premium would be £22.74 and someone who’s 51 – so somebody who’s going to have about 17 years’ worth of cover is £39.62.

So you can see obviously the premium there has increased, you know, in a sense quite a bit.  We’ve gone from if you’re 21 it’s going to be £9.68 and if you’re 51 it’s going to be £39.62.  And the reason for that is quite simply obviously the older we are, the more likely it is that we are getting towards an age where we are going to pass away, as we get older, things with our health happens, different things start to change and we are just more likely to pass away, so that’s why it does become more expensive.  Now I haven’t stopped at age 51 so don’t worry.  I am still going, because I know obviously people are going to be thinking, “Oh what about older people?”  I do speak to quite a lot of people who were brought to me by introducers, wanting maybe to look at gift planning or IHT planning and again wondering kind of like what the price is because we do tend to find quite a bit as well, that a lot of people in that situation tend to be, you know, possibly older and it’s sort of like, they’re at an age where they’ve suddenly gone, “Oh hang on a minute, I actually need to really worry about this now, this taxation and things for the family.”

And obviously, they are older, so it is something again where there is a much higher risk, so what I’ve done with these ones, I have changed it up a bit.  Because if I do it for age 61 and age 68 and that’s only seven years’ worth of cover and to be honest, when we’re kind of like reaching this kind of age, I’m not saying it’s a case of everybody, but a lot of the time, if you’re speaking to somebody who’s towards that age, it might well be that they do have a mortgage that’s been taken out.  But it can also be as well, that again, we are as I say starting to look more like that real long-term planning for the family.  And whilst before anybody sort of like starts, you know, sort of like jumping up or anything and saying, “Well, it should be whole of life insurance if we’re looking at, you know, IHT-planning,” that is true and I am going to be coming onto that, but obviously when we start talking about the differences in price, you will see that sometimes, especially the whole of life planning, isn’t insurances, they just aren’t affordable for some people and so sometimes, to age 90 might be something that people need to consider.  So I’m obviously not saying that that’s necessarily the advice that you would go down.  You would always – if it was IHT planning, go down a whole of life route at first if you can, but obviously to age 90 might be possible for –

So for people going forward on this, we’re going from to age 90.  So, the 51-year old, £250,000 for 17 years was £39.62.  Now obviously things are changing now, because we’re going to 61-year old to age 90, so now it’s an extra, so we’re now going to 29 years’ worth of cover.  So if you were 61 and you were needing that amount of cover to age 90, then the premiums do become close to £264 per month.  If you were 71 and you were going towards age 90, it would be £580 a month.  And if you were 81 years old needing cover to near age 90, that would be £909 per month.  So obviously, things have really, really started to increase quite a bit and I do appreciate for anybody who’s thinking about the maths and everything, well, I could have done a 21-year old to age 90, yes I could have done, but I was trying to do some like – things that are more realistic for what somebody would need.  You know, it’s more realistic with life insurance that you would need it until your age of retirement, which is when you would usually have your main financial outlays, your main financial sort of like family requirements, whereas obviously as you get older, you possibly don’t have a mortgage now, or you maybe don’t have your dependents any more but then we’re going into a slightly different realm of where the advice needs to go.

And then things change quite a bit.  I’m trying to decide now, do I do – I’m trying to figure – yeah, I’m going to go life and critical illness cover and then I’ll come back towards doing the life insurance and the whole of life insurance mix.  Just because as well, with life and critical illness cover, I always like to, wherever possible, to combine them.  And this is something that I do come across quite a bit and it’s something that I do have to reiterate, especially when I’m doing the training programme that I offer and also when I’m speaking to other advisors sometimes when they bring people to us.  Is that with critical illness cover, there is a survivability clause.  If you do standalone critical illness cover without life insurance, then if that person is diagnosed with a critical illness that is claimable and obviously it’s fine, the claim can go through, but if they don’t survive that diagnosis by – I think it’s at least 10 days, either 10 or 14 days, anywhere up to 28 days depending upon the insurer’s contract, then the insurance policy will not pay out.

So, a really good example of this is somebody has a major heart attack, they’ve had the heart attack and they die.  So, in a sense of, you know, straight away the critical illness cover would have paid out, but they’ve died within a few hours so it’s not going to pay out because it doesn’t have the life insurance linked to it and because that is one of the terms of the critical illness policies.  So wherever possible, we generally will link critical illness cover with life insurance on the basis that if that situation were to happen, that person’s unfortunately had a heart attack, so yes the critical illness claim would have kicked in but they’ve died two hours later, it’s automatically then transferred over to a death claim.  What’s really important is, because sometimes you do speak to people and they’ll be like, “Well I want critical illness cover but, you know, I’ve already got life insurance, I don’t need it,” and yes people obviously do think that, they can think that and it’s absolutely fine if they do want to believe that, but one of the things I always say is just make sure that you give people the option.  Just say to them, “Look I can do you stand alone critical illness cover, but if I include life insurance, it’s this price.”

Now, you tend to find with some insurers there’s no price difference at all to include life insurance or not, so you may as well include it in.  With some of them, it is a little bit of a change in price, it’s not usually – there’s times where it can be a bigger change depending upon different risk factors, but it’s usually not much of a change at all.  And often, when you actually show people the pricing, they do turn round and say, “Oh, well actually yes, I will have that as well, I may as well do.”  So with this one, just going back to it, so we’re doing life and critical illness, again, we’re doing £250,000-worth of level cover, to their retirement age of 68.  Now, what I want to be clear on as well though is, with this one, I have done the basic contracts for the critical illness cover because again, I just wanted to make things as simple as possible.  So I do understand though, there are some insurers where, in a sense their contracts are just their contracts so they’re not basic or enhanced, they – you just get what they are, so for those ones, that’s the pricing.  With others, we do have the basic contracts, where it is sort of what’s known as a core critical illness cover.  And then you would then maybe be able to opt with them for enhanced critical illness cover.  Maybe then also children’s cover on top.  But I’ve just kept it for the moment as the basics.  Okay?

So for a 21-year old – so we’ve gone again – so if you think about it, for the life insurance we were talking £9.68 per month.  So if we’re going to include the critical illness cover for this amount of time, we’re going to £62.22 per month, okay?  And then when we go to 31 years old, if it was just the life insurance, we were about £14.04 per month, whereas with this critical illness cover we’re going with £90.67.  So for a 41-year old, they start off with life insurance at just £22.74 and if you include the critical illness cover it’s going up to £155.03 per month.  And with a 51-year old, the life insurance if you remember started at £39.62 and at this point it’s become a £268.79 if you want to include the critical illness cover.  Now things are a bit different and it’s not as easy to do the comparison when they become 61 years old, okay.  Because critical illness contracts have a shorter end date than others, so with the life insurance obviously, it’s for a 61-year old and I went to age 90.  For the 61-year old, for the life and the critical illness cover, I can only go to age 75.  So for age 75 we are talking – for a 61-year old we’re talking £615.85 per month.

So you can see, obviously we’re going from a 21-year old at £62.22 per month and then we’re going up to a 61-year old of £615.85. The reason being that it starts – I mean it really starts to jump up from age 41, that’s when you’re starting to hit, you know, the £155 per month mark.  It’s because of the statistics and the data in the background that basically says that once you are reaching that age, you are starting to become a much higher risk of developing your serious illnesses.  So when it comes to critical illness cover, the main ones that we’re looking at are the cancers, heart attacks, stroke and multiple sclerosis.  There are obviously many, many more conditions that are covered by most of these contracts, usually at least 60 conditions.  They do have the specified severities as well, but as I say, for this one we’re just talking about the basic contract.  So obviously if anybody wanted more of the enhanced contracts, then that pricing is going to be going higher still.

So I do apologise, I feel like this is so number-y and it’s so against me, I’m not a number-y person.  It feels so strange.  And I hope that I feel like it’s just going to be so boring for everybody to just be hearing these numbers.  But Settle asked for it, so if anybody says anything, fire any complaints over to Settle, it’s not me.  So whole of life insurance, so this is one where it’s one of those things where we’re never allowed to say in insurance or we should never say, so this is part of the training that I do, so hopefully people are already doing this.  We can never guarantee – we can never say that an insurance policy is guaranteed to pay out because you just never know what might happen.  And there’s a number of things.  So one of the things when I’m chatting to people and I’m advising them is I always say, “Look,” because they’ll say, “Can you guarantee this is going to pay out?” and I’ll just be honest and I’ll say, “I can’t guarantee it’s going to pay out, because of a number of things.”  And obviously then what I do is, I do back it up with the statistics of how much insurers do pay out because of the fact that people are worried and they do have these questions.

But obviously, the reasons that we can’t ever guarantee a pay out is that what happens if this person stops paying the premiums?  You know, what happens if they haven’t told us everything that we needed to know?  A lot of the people I speak to do go for medical reports and things, so in terms of like health risks, the chances of it being anything coming up at the point of a claim and us having not known about it is incredibly small.  But for other people, you know, it’s just a case of well, you know, if there is something there and we don’t know about it then, you know, as long as you are completely and 100% truthful and as long as you keep paying the premiums for the whole policy and also one of the biggest reasons we can’t guarantee that there’s going to be a pay-out is that we can’t guarantee that this person is actually going to die whilst the policy’s active.  If it’s a term policy – if it’s to age 68, you know, they might live until – well it would be obviously really, really horrible luck in a sense – if something’s horrible, like in some ways really good looking at it in other ways, because obviously they haven’t passed away during the time but, you know, they could pass away at 68 years and three months based upon what we’ve been talking about.  And it wouldn’t pay out, because they would be three months past the age of the end of the policy, so we can’t guarantee these things.

The difficulty comes in a little bit with those kind of timings, is when we’re talking about the whole of life insurance, because it is almost guaranteed to pay out because it just keeps going.  You know, if you live until you’re 105, it’s just going to keep going and going and going.  It doesn’t have an end date.  But again, we have to be careful because it is that thing of like, provided that they’ve been 100% truthful and provided that the premiums are kept up to date.  Now, depending upon when somebody takes out a whole of life policy, the premiums can be, you know, I mean they are generally high anyway because of the fact that they are in a sense almost – I don’t want to say guaranteed but they are, you know, almost guaranteed to pay out and so the insurer – the risk to the insurer is quite high, because they’re saying, “Well actually, at some point, yes we will be paying out £250,000 to you.”  So definitely on this one as well, the sooner you get it in place, the much more favourable the pricing is.  And it can really catch people out, especially as they are older because obviously the risk is so much higher and what the insurer’s trying to – I’m going to say this, even though I’m not an insurer, so I don’t know for definite, but the insurer’s trying to figure out how much should we charge you because of the fact that we think you’re going to be claiming on this, you know, in this amount of time period and we need to be able to kind of also replenish the financial resources that a claim is going to take out of the company, so that we can then continue to fulfil all the promises that we’ve made to everybody else.

But I do appreciate for people, you know, and especially for some of the people I speak to, the premiums, you know, they can just feel – they can feel silly.  But, you know, there is lots of calculations that are going on in the background.  Anyway, I’ve wittered on!  So I’m going to refocus myself.  So, whole of life insurance and then we’re going to go onto income protection.  Okay.  So whole of life insurance of £250,000.  So this is where it’s going to start seeming quite pricey.  So, for someone who’s 21, the first premium – well the premiums are going to be £137.04 per month.  Now that is a massive difference compared to just life insurance that’s going to end at the age of 68.  So if I turn around to a 21-year old and one of the things we see in our industry is that engaging the younger generations is obviously – it’s hard because, you know, very clearly – you know, they want to live forever.  They’re also struggling to try and get into work, they’re struggling to try and get onto the housing market, so if they’re trying to save money, if they’re renting, then spending out money on an insurance that’s, you know, they’re probably not going to – at 21 they’re probably not going to pass away at a young age.  You know, it could feel very, very – it could feel very pointless to them.

So obviously if we’re looking at something like life insurance, £9.68 per month versus a whole of life plan which is £137 and just over that per month, I think I know what a lot of 21-year olds would say to that.  Let alone us trying to get them to pay £90 – £9.68 per month for just life insurance that’s going to end at age 68, actually getting them to do the whole of life is pretty much – I just can’t see that happening.  We then have 31-year olds.  So, a 31-year old at whole of life insurance of £250,000 is going to be £178.19 per month. Now, what I find quite interesting about it, that’s – I know £40 a month jump from the 21-year old seems – well, it’s obviously £40 per month and let’s face it, much rather have £40 per month than pay out £40 a month.  But it doesn’t seem as big a jump as I was expecting, when I was doing the quote.  So I was quite, I was pleasantly surprised it was only an extra £40 per month, which probably sounds a bit strange but I was expecting a bigger price jump, but that does start – it’ll come very soon, don’t worry.

So again, if you were doing it to age 68 it’s £14 a month versus the whole of life which is £178 per month.  Huge, huge, jump.  And then we’ve got that 41-year-old and I’m sure you won’t remember, because I have been saying numbers here, there and everywhere, but they were £22.74 just to go to age 68.  If they were doing the whole of life, it’s £260.98, it’s almost 10 times dearer to go for a whole of life policy.  Now some people might be in a position where they need that at that age, they might already have amassed quite a lot of net wealth or they might be in a situation where they have a dependent that they know is going to be a long-term dependent and they want to make sure that when something happens to them that they are looked after.  Obviously, when you’re talking into sort of that kind of realm, if you did have any dependent children or long-term dependent adults at all, then it is probably a case of yes, there are these insurances in place but really, there should be some really good financial planning – whole financial planning being done there to make sure that all the avenues are being looked at as best as possible.

It then starts to get a bit more interesting as we get to the older ages.  So, a 51- year old, we are going to be talking – so I said a 41-year old was £260.98, a 51-year old we’re looking at just under £379 per month.  A 61-year old, we’re looking at £543 per month, a 71-year old – and this is where we’re starting to really jump up.  Not that the – I’m not saying the others haven’t jumped up, but this is really starting to jump up, so a 71-year old for £250,000 for whole of life insurance would be just under £840 per month.  And if you were 81 years old, the price would be around £1,710 per month.  So obviously, 71- year old to 81-year old, we’ve absolutely doubled the premium.  That is a big jump that is, you know, for some people no matter what, paying out, you know, £1,710 per month, that’s quite an intense amount of money and bear in mind as well that a lot of people, you know, we’re talking from the age of 51, £378.75 per month.  But bear in mind that a lot of people from the ages of 51 are starting to have health conditions.  Now, I’m not saying that all health conditions that will influence the premiums.  There are quite a lot that will do, we do know as well that now the statistics are something like one in two people will have cancer in their lifetime.  It’s not out of the realms of possibility to say that a lot of people are going to be looking at these premiums – these are the basic premiums that I’ve quoted and if you are at a stage where obviously these conditions are starting to come into play, these basic premiums may not be what someone is able to get and they are going to possibly start increasing a lot more.

So, I appreciate that that’s probably just left everything on a case of, “Wow!  Life insurance can be expensive,” but I just want to bear in mind yes, that last one is massively expensive but just remember, when we were talking about life insurance just to the age of 68, you know, we were talking generally for people, you know, who are 51 and younger, you know, the highest amount was about £40 a month, the lowest for a 21-year old was £9.68 per month.  It doesn’t have to cost everything and obviously, I’ve done these quotes for the whole of life insurance, you know, a 21-year old needing £250,000-worth of whole of life insurance is probably not really the case for a lot of people but it’s just to show sort of like, the reason I’ve said all this is just to show right, you know, this is how it starts to escalate as we’ve gone along.

Income Protection is something that I absolutely adore.  And it’s the last one we’re going to be going through, so there’s not that much – that many numbers left, so you’ll be all very pleased to hear that I imagine.  And also, I’m looking at lots of numbers and I’m terrified that I’m saying the wrong ones in the wrong order, but I’m fine, I’ve done it alright for now, I’m going to listen back and make sure that I’ve not suddenly said one completely out of what it should have been.  But in terms of income protection – so with this one, this is an area that obviously we are massively trying to promote in our industry because of the fact that it’s just so much more likely that you will need an income protection policy than you will need a life insurance policy.  I do a – obviously as I’ve said – I’ve mentioned before, I do a training course and part of that I talk about the statistics of basically me and who I am and the chance of claiming on things.  And the life insurance side of things – the chance of me claiming on the life insurance policy at an age that wouldn’t be expected generally of somebody – I’m 36 – so somebody who isn’t 36, you know, no I’ll get that right, somebody who is 36 but, you know, the assumption that I am going to die before my expected age in probably, what my 70s, 80s or some sort.  And the chance of that is about 5%.

And then when you take into account critical illness cover, the chances of me being diagnosed with a critical illness at my age, compared to everybody else, you know, and in terms of like when I would – they would expect me to actually be maybe starting to develop things like maybe a cancer or something else is about 14%.  And the chances of me being unable to work due to ill health for at least two months is 50%.  So there’s a 50/50 chance that at any given moment, at 36 I will be so ill that I won’t be able to work for two months.  Now, you know, a lot of people might, you know, listen to that and think, “Well, I’m 40 and I’ve not had this issue or I’m this and you know, I’ve never had a day off work,” and it’s a case of that is absolutely true, you know, some people obviously carry on working and there’s no issues whatsoever.  I mean this is something that’s definitely an area that means a lot to me.  I’ve said in a lot of different situations, my Dad has Parkinson’s, he was medically retired.  My Mum has a number of health conditions including fibromyalgia and she was medically retired due to that.  Neither of them had income protection and it’s something that would have been very valuable to both of them.  So, okay.  Right.  I think it’s important, that’s what I’m trying to say.

So income protection, I’m going for £1,400 per month and I’ve just done it on level again.  I’ve tried to just keep it nice and easy and simple and everything like that.  So I’ve done £1,400 per month benefit for somebody.  So if someone’s unable to work, they’re able to take you know, obviously from the insurance, they’re able to get £1,400 per month into their bank until they’re well again to return to work, or if they can never work again it’ll just carry on until their retirement age.  So again, I’ve done the retirement age of 68.  On this one I’ve done a two-month deferred period, so that means it would take two months of me being ill for the financial aspects of the insurance policy to kick in.  And the reason I say that is with a lot of income protection policies, there’s a lot of help and support you can get before the financial side of things kick in.  So like lots of support services so that you can then maybe get better even before the two months are over or maybe sort of like start to rehabilitate a little bit.  There’s lots of extra things.  But I’ve done it, anyway, a two-month deferred period, done it to retirement age of 68 and I’ve also done it on a full-term claim basis.  So that means that if, you know, I was ill and unable to work ever again, it would continue to pay right up until the age of 68.

And this is something that’s really important and especially when we’re looking at income protection, I know we obviously – and I was talking about the critical illness before – critical illness is seen as obviously a time that’s quite confusing because, you know, if you are somebody who is using a number of different insurers, then we have the thing of – we have the basic or the core and then we have the enhanced and then you can have the core cover with children’s cover and then the enhanced cover with children’s cover so you can sometimes be looking at four policy – four types of offering from multiple insurers.  And when you’re looking at those comparisons it can, you know, you can go a little bit cross-eyed and it can be a little bit, “Oh, you know, oh this is way too much effort for me to consider.”  Income protection is kind of the same as well but that’s because the beauty of income protection is the fact that you can play about with it so much.  You know, we do have the option to play about with the sum assured, the deferred periods, the retirement ages, the full claims or potentially the shorter claims.  So that would maybe like a one-year, two-year, five-year claim period.

Now, I could quote those and they would obviously be far cheaper than what I’m quoting now and what you can see.  But one of the things that I generally do and I think it’s best practice – well it’s definitely something I teach my team to do.  I always start off by saying to people, “Right, this is your salary, this is the maximum that we can do and, you know, this is the deferred period based upon sick pay and your savings and I’m going to do it all the way to retirement age and I’m also going to be doing a full-term claim, so it’s going to start from now and it can potentially pay all the way to your retirement age.”  And I say this, I’m doing the all-singing, all-dancing version.  So I’m giving you the best possible version that you can look at.  If you then don’t feel that that’s right for you or the pricing’s not for you then we work backwards.  And we start to then maybe tweak things a little bit.

So, you know, it might well be – well actually we’ve done it, you know, to age 68 but were you actually were planning on retiring at age 68 or are you planning on retiring a bit sooner?  Or maybe do say, “Well actually, you’ve got this sick pay and you’ve got some savings, so do you think you could maybe actually have a three-month deferred period, instead of a two-month?”  Now, I know that some people will listen and just say, “Well no, if they need to have a two-month deferred, then it needs to go retirement and leads to a full claim, that’s what you give them and that’s that.”  And it’s a case of, well that is what you can do and obviously as an advisor, it is absolutely your choice but what I like to do is and what I try to do is we like to give people choices and say, “Look, this is the best but, you know, is it affordable?  Can you maintain this premium for the long-term?”  And, you know, let the client have a good influence as well in terms of what is available for them.  So your job as the advisor is to inform people as to what’s there so they can then make the informed choice as to what suits them.

So bar that little kind of a – I don’t know, I felt like I went onto a bit of a preaching session then, didn’t mean to, sorry everybody.  But okay, so we’re going for the 21-year old – so for all of this, for a 21-year old, it’s £23.38 per month.  Now this is the one I think we really need to, you know, when we’re talking about trying to get the younger ages in, it’s this that’s going to be the thing that gets, I think, the younger ages in.  Because of the fact of – as I say, life insurance, the living for ever – health, again, the living for ever, but if you turn around and said to them, “Well look, for this £23.38 per month, you know, I haven’t figured it out in my head but you know obviously we’re talking less than £1 a day to have this, to make sure that their income is secure, going forward.”  Now, I think that’s quite a hard argument to say, “No I don’t want that.”  I mean yes, if you say to somebody, “It’s £23 and something a month,” they’re going to go, “No, that’s a night out, I want a night –” you know, kind of thing.  But it’s just breaking it down and saying, “Well look it’s only this, you know, this per day actually, you know, let’s just actually look at this sensibly and go forward from there.”  A 31-year old who’s wanting a similar amount – it would be £33.89, so we’re just talking a little over £1 a day for a 31-year old to protect their, you know, that income which is – it’s obviously it’s brilliant again, it’s a night out, you know, if that.  It’s, you know, well, it depends on where you live, £33.89 I don’t know if that could be a couple of nights out for us up in the North.  I think in London, it’s maybe a couple of hours, I don’t know?  Just having a little giggle there, that Alan was out in London a couple of weeks ago recently and I did have a wonder as to what size a bill he’d be coming home with from the bars.

A 41-year old wanting the same amount would be £65.47 per month and a 51-year old would be £85.11 per month.  And again, you can see if – so we go from a 31-year old that’s £33.89 to a 41-year old it’s £65.47, we’ve doubled the premium.  But as I’ve pointed out, at 36 there’s a 50% chance that I’m going to be claiming on this policy after the two-month deferred period really specifically to say well it’s two months of me being, you know, at least two months ill and having to claim.  So, the chances are, you know, obviously it’s getting more and more risky.  The older we get the higher the risk is that we are going to have something which is going to mean that we’re off work for quite a while.  So a 51-year old, we’re then going up even higher, an extra £20 a month, going up to the £85.11.  And then with the 61-year old, so this is different – so I’ve done this slightly differently.  Because of the fact that for me, if I was 61 and wanting to look at something that was protecting my income, I don’t think personally I would want something to go into age 68, I’d want it going higher.  So I’ve done this one to age 70.  Just because I think if I was thinking about this and yeah and also as well, there does come a point and for anybody listening, there does come a point with your compliance teams, where if you are starting to insure somebody with income protection above the age of 60, there is usually some kind of oversight of some sort.  Because of the fact that they’re going to be paying for a policy that they can’t claim on for a very long time.

That will be down to your individual company so it is worthwhile checking with your compliance people as to kind of what ages they will start to be saying, “Well hang on a minute, is an income protection policy – is this actually really good value for money, because of xyz?”  It’s probably a case of it’ll all be fine at what you’re looking at, but it’s just the case of make sure that you chat with them, get everything down that you need to get written down, talk about any of the risks and everything and probably some very clear statements with the clients, in terms of your demands and needs reports and things like that.  So a 61-year old, going to age 70, the price is £176.39 per month.  So again, we’ve gone from – well obviously we’ve over doubled again.  So from 51 to 61 the premiums have doubled.  Again, the reason being is that we’re just – again, we’re getting to the point now and well, I would say, not even say it’s 61, it can even be younger.  I mean my Dad was diagnosed with Parkinson’s in his early 50s, but he’d had signs from his early 30s.  But, we are getting to the point now where there’s maybe going to be conditions that are more long-lasting that you know, are definitely going to mean that you are not going to be going back to work.  Your chance of being able to rehabilitate is probably harder.  And I’m not saying that’s the case, because I’m sure there is plenty of 60-year olds, 70-year olds, maybe even 80-year olds or higher, that would maybe be listening to this, who are absolutely fit and raring to go.  It’s just some generalised statistics.

And just to be clear as well, in terms of the premiums, because as I say, from the start, I’ve done guaranteed premiums.  Now, with the IP ones that I’ve just done, I haven’t done – I haven’t done a lot of the options, because again, when I was saying about all the different things you can see when you look at an income protection comparison.  So you’ve got all those things that you choose, but then you’ll have reviewable and then you’ll have guaranteed and then you have guaranteed age-costed and then reviewable age-costed and each of them has its own thing.  Now, when you get to certain ages, there are – well, some people would say, you know, for a young person, why not do reviewable because it will be cheaper and then they can lock something in place when they’re older that’s more guaranteed.  Because of the fact that with the reviewable ones obviously the premiums can change, if they’re age-costed then they are going to be changing each year and getting more expensive as they get older.  There’s then also others who would maybe say, “Oh well when someone’s older do it reviewable because then it starts off really cheap compared to the guaranteed and then it’ll just have to sort of balance out at some stage, the fact that they have to pay more as it goes along.”

Each advisor probably has their own approach to things.  My general approach is to do guaranteed.  I’ve also got a really good example of this as well.  I did an example for somebody and I promise the figures are absolutely right, okay.  I am going off the top of my head but the figures are right.  And I was speaking to somebody and they were in their 30s, it was their late 30s and we needed to do insurance and basically I had a guaranteed age-costed premium and I had a guaranteed premium.  The guaranteed age-costed premium – and this just comes down to thing of me saying giving people the choice.  Because the last thing I’d want to do is say to somebody and this person especially – I was just like, “Right okay, the premium is, you know, if it’s going to be guaranteed, it’s £120-ish a month.  But I’ll be honest and say if you do research away from me, you’re going to find ones that are cheaper and I want to tell you why and explain why.”  And that’s my approach because I want people to know if they do go search for something, they don’t go away thinking, “What on earth is Kathryn on about?  Is she just trying to play me for a mug?  Absolutely not, I’m not paying that, I can get one that’s loads cheaper.”

So, I did it and I basically said, “Right, so I’ve got this one that’s £120 per month, okay and it’s guaranteed and I’ve got this one here which is £75 per month.”  And I was like – I said, “I imagine the £75 per month one sounds a lot nicer.”  And of course, as you can well imagine, they were like, “Yes, that does sound nicer.”  And I was like, “I know it does.  Because that one is guaranteed age-banded, which means it starts off at £75 but it’s going to start increasing each year.”  And they were like, “Okay, but it’s going to take a while for it to reach £120.”  I was like, “It is going to take a while for it to reach £120 but just bear with me for a minute.”  And I – obviously I had the illustrations for both and I showed them the total amount of premiums that they were going to pay, you know, depending upon the different ones.  And if they went for the guaranteed age-banded and it was the £75 a month-ish and they kept that and they didn’t go to a guaranteed one, then overall they would be paying £90,000 more in premiums than they would do if they had gone for the £120 per month in the first place.

That’s not a small amount of money and we can think that probably everyone listening would think that that is not a small amount of money.  It really isn’t and that – obviously, straight away, that person was like, “I will pay £120 per month, thank you.”  It doesn’t work with everybody.  Not everybody sees that kind of long term future with it but with something like that, I mean, I was absolutely floored at the difference in the pricing of the term.  But that is what it was.  So I always think it’s a good idea to give them the chance.  And obviously as well, just be very clear and say to them, “Look, I can do you,” and, you know, say to people, “Right yes, I know someone else has maybe quoted you cheaper, I can give you that quote as well, you know, I can see it right in front of me, it’s right there, but I’ve not done it because of this.”  And once you explain it and people take it on board, then it makes a whole world of difference.

I’ve also had it as well though, where I had somebody and they were older and they were wanting some insurances and I think – no I’ve gone away from income protection now, it was life insurance and again, usually I would only really want to be doing like guaranteed options, but with this person a reviewable option actually ended up the cheapest which really surprised me.  It wasn’t loads; I think it was £60.  I think the difference was £60 over the whole life of the policy, but they were just like, again, they were like, “Well, I’d rather have – me have £60 than the insurance.”  I was like, “Yeah, I agree with you.”  And so they decided to go with that.  And obviously, you know, to each their own as to what they feel is right for them but that’s just my little bit of an input.  It’s just to make sure that you give people those options, that you have them all to hand just in case – also as well, people can really easily do a lot of searches on their own now online and it just gives you a little bit more credibility I think, as an advisor, with any of these options that we’ve discussed today, just to have some of those other bits available, to say, “Yes, I can see that, this is what I’ve not recommended it, but if you want to look at it, you know, seriously, then I can obviously give you some options.”

I hope that’s been helpful.  I feel like this has been a strange episode for me, because I’m on my own for the first time in a long time.  It’s a really, really long time since I’ve done an episode on my own and it’s been nice, but it does feel weird not to have somebody to talk to and to maybe bounce ideas off and make sure that I’m not saying things that are just completely out of the realm of sensibility.  But thank you very much for listening everybody.  So next year we’re going to be starting off with a big mental health awareness week.  So this is something that has been cooking up in the background.  And as some of you know, I’ve been putting together – well I’ve been with the mental health working group, with the IFOA, so the Institute and Faculty of Actuaries for about the last year or so and part of my work with that group has been – I’ve put together what – we’re calling it essentially a mental health mind map, which is where I have, in a sense plotted the four key stages of accessing insurance.  So the first one is like the trigger, you know, what is it that makes somebody want to go for insurance?  And then, within that, talking about where’s the mental health aspects of that?  Where do they come into play?  Or potentially do they?  And then the second one is the routes to the insurance, so that would be, you know, do we go advise, non-advise or through an aggregator?  And again, the different mental health aspects that come from that.  The third aspect would be the actual products and services, you know, what is available, you know, if we’re looking at maybe group cover, personal, business.  Where does the mental health kind of touchpoints come into play with those products and the policies that are on offer?

And then the last will be the claims and the support services and again, where does mental health come in on that?  So it’s a really big mind map and what we’re going to be doing is taking each section in a sense, day by day, so it’s going to be short podcasts for every day over a week followed by a webinar on the Friday.  All the weeks and everything and the dates are still to be confirmed.  It is being done in association, as I say, with the IFOA and John Brazier from Cover has kindly, sort of like, said that yes, they would obviously love to be involved and there’s lots of things.  So keep an eye out on social for that.  If you – one of the things we’re asking is as well, is for the webinar, if you have any questions that you want to put forward to an advisor about mental health, if you have any questions that you want to ask an actuary or an underwriter, send them in, even if you want to send them into me you can do.  There’ll be lots of contact going out in terms of sort of like you know, places that you can contact.  Again, you can always go straight to other people that you may know who are part of a mental health working group.  Potentially even go straight to John at Cover.  Just with the questions that you would like us all to maybe go through and answer in terms of mental health and accessing insurance.

So I hope you’ve all found this good.  I don’t know how to – I don’t know how it’s going to be taken, it was just so much numbers, I’m numbered out!  But as always with anything like this, the podcast is always transcribed and we will be doing things in terms of putting tables out, so that you can see very clearly what I’ve been saying number-wise.  But as with every episode, if you’d like a reminder of the next episodes, you know, just feel free to contact me, visit the website practical-protection.co.uk.  If you have listened as part of your work, this is absolutely a CPD episode without a shadow of a doubt.  You know, you can get a certificate on our website thanks to our sponsors Octomembers and if you are a part of Octomembers, you know, I do think it’s a good place for people to be involved with, you can always log your CPD direct with them as well.  So, thank you for listening everybody, I hope you have a lovely Christmas and I will speak to you again in the New Year.