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Why British Expats in Spain and Portugal Should Look Past the Cost of Protection Insurance and Embrace the Benefits Image

Why British Expats in Spain and Portugal Should Look Past the Cost of Protection Insurance and Embrace the Benefits

July 25, 2022

For the thousands of British expats living in Spain and Portugal, robust financial assets, a comfortable income and a home to call their own are key to establishing life in a new country. Many fail, however, to make contingencies should misfortune strike. The impact of serious illness or death can be financially devastating for you and your loved ones if precautions haven’t been put in place first.


Protection policies are an umbrella term for products that protect the less tangible yet important parts of your life – such as income or mortgage. They include critical illness cover, life insurance and income protection insurance, and can provide you and/or your loved ones with a lump sum or regular payments to provide financial support in challenging times.


Yet just 28% of UK adults own personal protection insurance, according to a survey commissioned by Schroders Personal Wealth. Why is this?


Myths in Protection Insurance


Part of the problem is a lack of consumer understanding of personal protection insurance, which has allowed misconceptions to take root. Take for example the issue of cost. Many people assume payments for a protection policy will be high, whereas in reality monthly costs tend to much cheaper than many estimate.


Another common myth surrounds claims. Many people assume that insurance companies will happily take premiums year after year when nothing has happened but will try and wriggle out of paying anything if a claim needs to be made. This suspicion is widespread but misplaced. According to the Association of British Insurers (ABI) and Group Risk Development (GRiD), 98% of group and individual protection claims were paid out in 2021.


Understanding the Need for Protection Insurance


The recognition of the importance of a financial safety net has been a slow burner for consumers. Planning (and paying) for the worse can seem like an unnecessary expense when you’re fit, healthy and employed – many people simply assume they don’t need personal protection insurance.


Unlike insurance for products that we can actually see – such as a car or phone – personal protection insurance, for most of us, is little more than a direct debit every month, which can make it hard for customers to fully appreciate how essential it is.


This has changed since the arrival of the Covid-19 pandemic, which has thrown into sharp relief the instability and uncertainty that life can hold. Millions of us have become aware of the fragility of our health and well-being, and this has led to more and more people investing in protection policies. Attitudes are shifting: according to research from Hymans Robertson, more than a third of people are more likely to buy protection insurance due to their experiences in the pandemic.


The right protection insurance can give customers reassurance and a sense of control in an increasingly unstable world, especially as many policies now offer a raft of additional benefits. As well as payments, protection insurance can provide other forms of support such as extra funding towards specialist care, virtual GP services and professional mental health counselling. Personal protection today should be seen as a holistic service, rather than purely fiscal.


Extending the Safety Net


In tandem with this, proper awareness and education in protection insurance should include an understanding of what an employer will offer should the worst happen. According to Direct Line Life Insurance, one in six firms reduce an employee’s wage to statutory sick pay after just four days of sickness-related absence. This could leave many people facing significant financial shortfalls if they are unable to work for a long period, many are unaware of this fact, or assume support from government welfare will fill in the gap when in reality it is often insufficient for covering all outgoings and expenses. Protection insurance can cover the shortfall and provide a safety net should misfortune strike.


Early Preparation


Another pressure point for protection insurance is time. Many products, such as income protection, have a cut-off age (even if you are still working), and the price of premiums will be directly linked to age and state of health. Financial advisers should ensure their clients are aware of the time frames involved, and ensure coverage before any serious health conditions are diagnosed.


More and more providers, however, offer products for the over 50s and 60s, although these will be more expensive than those for younger customers. Nevertheless, it’s now possible to find insurance that can offer coverage into one’s 90s, a reflection of a world where increased longevity and longer working lives are becoming the norm.


Covid-19 and Product Innovation


The impact of the pandemic on the personal protection industry has been profound, particularly when it comes to innovation and new products. Insurance companies have had to work hard to ensure products stay relevant and suitable for pandemic life, with many providers taking new steps such as offering payment holidays in order to help struggling customers maintain their protection during the Covid-19 crisis. The challenge now is to maintain this momentum and continue to innovate – such as offering flexible short-term income protection that can be adjusted in line with lifestyles and jobs.


Putting Cost into Context


In a world where financial pressures are increasing for many, it’s up to providers and advisers to put the costs into context. For example, an adviser could explain to a customer that the monthly costs for a scheme like income protection insurance could be as low as the monthly price of a music or TV streaming service, therefore demonstrating to the customer how affordable cover can be. Or it could mean sharing relevant case studies of real-life policy holders to help customers relate to the products and really understand the benefits.


Communication is Key


Another area to focus on is the language used around personal protection insurance, as many customers can struggle with the specialist terms used. Financial advisers who focus on reducing jargon and communicating in a clear, easy-to-understand language that breaks down complex concepts and ideas, could help clients truly understand the benefits of coverage. As well as one-on-one verbal communication, this could extend to documentation, such as an annual statement outlining the extent of cover and the benefits a client has access to.

Communication can also include how protection insurance is presented, such as packaging it as an integral part of a financial product and not an add-on with extra costs. If you get a mortgage, then mortgage protection insurance is a key element that ensures you keep your home should the worst happen, rather than simply another expense.


When speaking to clients, financial advisers should ensure they are familiar with each person’s background and story – knowing your audience is key to engaging them in a discussion. In addition, paying attention to their concerns and problems will help you tailor your response, and ensure they feel listened to, rather than receiving a sales pitch. Ensure you conclude any discussion with a summary of what’s been covered, giving customers a final chance to ask follow-up questions and clarifications. Putting everything in writing so that customers can refer back is also very helpful. Finally, give them the time and space to digest and reflect upon your message afterwards, and respond with their own queries and feedback.


Given the continuing financial instability of many people’s lives and the possibility of economic turmoil in the future, the need for personal protection insurance is only going to increase. It’s vital that the industry addresses any lingering reluctance in customers, and builds on advances made to sustain this engagement over the long term.


Give us a call today on +44 207 998 0570 or e-mail enquiries@fwm.gi to book your free, no obligation consultation.



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