Pretoria, Gauteng -- (SBWIRE) -- 02/21/2013 -- Income protection products seem to be hot news right now, with a few of the established players in the market launching and emphasizing enhancements to their income replacement offerings.
While the underlying financial needs that relate to income are recurring in nature and there are recurring income replacement products available on the market, lump-sum disability products remain the most popular.
Popular wisdom suggests that, if a client had to choose between the two, they're better off with an income replacement policy.
But what should clients and financial advisers be aware of when choosing an income replacement product?
Below we share our shortlist of key points to consider.
In fact, we created BrightRock's product to ensure that you can create an entirely needs-matched solution for each of your clients that takes into account all of their different needs across both their income and asset protection needs:
1. Needs duration
Some recurring needs are lifelong needs while others may fall away in time.
The need to cover basic household expenses and healthcare costs exists for life; however, the monthly costs associated with educating children will fall away.
Traditionally, income replacement products provide cover only until retirement age. Some of the newer products in the market allow for limited post-retirement cover as well - but because of the limits that apply, the cover may be severely watered down in retirement.
In BrightRock's view, a good income protection product should offer clients the ability to secure appropriate pay-outs post-retirement for lifelong recurring needs (like healthcare and household expenses).
2. How cover grows
While the monthly expenses covered under the banner of income replacement policy are all linked to consumer inflation, the underlying costs may grow at different rates over time.
Simply growing cover by inflation may lead to significant underinsurance for these needs.
The ability to structure the cover for each of these needs by taking into account their duration and growth over time is a central concern.
This not only ensures that your client's cover is relevant, but that it's also more cost-efficient, because it can be priced appropriately from the outset.
3. Claims criteria
When it comes to claims, many products are based either on occupation definitions or medical definitions. However, occupation-based criteria are sometimes so narrow that a client with a severe medical condition may still be deemed able to work.
On the other hand, the application of strict medical definitions won't necessarily make provision for the case where a client who has a mild medical condition may be significantly hindered in their ability to perform their occupation.
It is important that clients enjoy the benefits of both worlds with the application of objective medical criteria and an occupation-based underpin.
4. Cover continuation
Typically, while your client's insurance needs may change or move over time, this doesn't mean they disappear or that new needs won't arise. The ability to buy up more cover when they need it, is key.
BrightRock offers policyholders the ability to redirect premiums from an area where they're no longer needed to an area of cover where they can be better applied.
5. Claims-stage flexibility
We believe it is important to bear in mind that the nature of your client's financial need may differ at claim-stage depending on their financial circumstances and condition at the time of the claim.
Other product structures in the market require clients to make the choice between capital disability and income protection at policy initiation, when they couldn't possibly know which choice would be more appropriate at claim-stage.
BrightRock has the only product on the market that will let your client change between a lump-sum or recurring pay-out, or a combination of these at claim.
Because at BrightRock we understand that your client is in the best position to know, with prognosis in mind, what their financial needs will be. This helps place them in the position to make the correct decision for them.
All in all, BrightRock has developed needs-matched life insurance because we understand that no two clients are the same. This is a world first.
BrightRock was started with the goal of creating insurance products that truly meets consumers’ and financial advisers’ needs. It offers truly individualised life insurance cover that’s built around your specific needs at the outset, and is specially designed to change with you as your needs change. And because BrightRock’s cover is flexible and changes appropriately when your needs change, it’s more efficient. This means both your cover and your premiums remain relevant, and more affordable, throughout your life. BrightRock (Pty) Ltd is an authorised financial services provider, underwritten by Lombard Life Ltd.