As the world changes, over the long term, life becomes much easier for people due to new technologies and a greater level of real average wealth per person. In general, young people now tend to take things for granted which in the past were either non-existent or seen as luxuries.
This new perception of life has meant that over the years, young people have become less concerned about financially protecting themselves and their families against illness and death. There is as much of a need to cover yourself now as there ever was, but young people’s mindset isn’t like it used to be, and there is much less concern than there was.
This isn’t a surprising result given the world we live in today and when you see documentaries showing the type of people ‘living on the breadline’, having the latest smart phone and a 50 inch TV in every room. It seems far cry from what you should be imagining life as a struggle. Consciously it can annoy people to think benefits are spent in this way, but subconsciously I think it makes people misinterpret this as a sort of reassurance that even if your income does stop you will be looked after by the state, and still be able to have some of life’s luxuries. But the fact is, other than having the latest gadgets, life can still be hard, and a single bit of misfortune can change finances massively if you are not insured properly.
Last week I had a stark reminder of the times we live in. We had friends round for dinner, who owned their own home, and had just had their first child and were in a similar position to us. Because of their new commitments I was telling them how important it was that they protect their family with various insurance products, because currently they are not insured at all. Not long later, one of them asked me for our wi-fi password, to which I replied we don’t have the internet here. They thought we were the odd ones, not having the internet at home but having a full protection package. And the worst thing is, they are absolutely right. In today’s world, we are the odd ones out. Not having the internet is more likely to raise your eyebrows than not having life insurance. Too many people genuinely think the internet is a more important basic requirement than protecting your family.
There are other factors which aren’t helping the matter. Tax relief was taken away from new life assurance policies. The PPI scandal has made some people think all insurance is bad. However the main reason is that life assurance used to be compulsory when you had a mortgage, usually taken in the form of an endowment policy which were the most common repayment vehicle for interest only mortgages. There have been too many negative contributions to the downwards trend, and there needs to be a major national shift to make sure that this trend doesn’t continue.
Usually the first and most common time when insurance is considered is when people buy their first home. This is a time when clearly people can see that they have a new liability and there is a definite need to protect themselves. If they don’t appreciate their needs then, it is increasingly unlikely they will ever appreciate it in the future. But even at this point, most homebuyers need to be prompted about their needs in order to take any action. Luckily most mortgages now have to be sold on an advised basis which provides a point when somebody can discuss protection needs. There are however many more points in life which should prompt a protection review, but the discussions don’t start because they are not in front of a protection adviser. Things like the birth of a child, change of occupation, change in income, finding a new partner or simply coming into adulthood. All of these things should be prompts for a review of your financial situation and protection arrangements.
Jason Hinde DipPFS
3rd March 2015
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