In this article, no bereft spouses or tearful orphaned children were harmed by being used as commercial props to sell you insurance.
In Ancient Greece, they came up with three ways of persuading a person to see the validity of an argument: appealing to your emotions (or pathos), if I can sway you based on my authority as a speaker (my ethos), and if I can do so through cold hard facts, data and logic—its logos.
The Greeks also gave the world, Classical Philosophy and Rhetoric ( you may remember a wonderful book which, despite appearances, is all about that, and which definitely stands a re-read is Zen and the Art of Motorcycle Maintenance. Trust me!). We are not going there though.
Nope: what I am going to do is to talk to you about insurance, or if you like protection, in a way 100% based on the logos of it—and which won’t in any way try to make you sign up to anything because of cancer or your widow being forced to eat cat food.
Protection isn’t an emotional decision
Because you know that line already. Insurance companies get very cringe when it comes to promoting protection: ‘How would you feel if you left your loved ones with x, y, and z financial burdens?’ etc.
Forget that. Don’t forget to look after your loved ones, either. Fun fact I learned the other day; the reason they test cat food is edible by humans is that so many broke people died from eating it in the Great Depression that we don’t want any repeat of that.
But the arguments for insurance—or what I think is actually a better term, protection—just come down to pure maths: If you are not around or if you can’t work, logically, there will be a deficit. Can it be met by existing funds and protection and without impacting lifestyle? If so, you’re gold, move on. if not, just cover the shortfall.
There are lots of different sorts of protection products, and the differences between them matter. But for now, don’t focus so much the specific differences between them, and more on what they have in common: using them as a rational means to protect yourself and your family. That’s the best perspective, IMHO.
Let’s use it on two tracks: about you as an employee and separately as a long-term saver and investor. For sure, there are big companies out there that do offer good life protection policies to their employees; perhaps unsurprisingly, they’re nearly all insurance companies, with some firms offering substantial free cover limits and additional services like bereavement counselling, mental health support, and financial advice for families of the insured.
But while many of us do work in financial services and insurance (about 8m people in the US, and nearly 2.5 million in the UK), maths again will tell you that unless you do work for a company that understands the value of life insurance because it sells it, it’s less likely to be on the company’s agenda.
Yes, they do have legal obligations around this; a UK employer will typically provide healthcare and medical insurance, disability protection, in some cases will match your retirement plan contributions. Plus, well over 95% provide supplemental life insurance (also called death in service).
But you are taking a bit of a chance with even what looks on paper like a great, tax-free bit of legacy. Death-in-service (DIS) cover is a common employee benefit, but your employer isn’t legally obliged to offer it—when was the last time you asked if you are on it? Say you work for a company with a policy where that adds up to 3x current annual salary at time of death , and you have base salary of £150,000—you might take home more in bonuses, but they’re not included in the DIS multiplier. That could be a nice £450,000 for your better half… but you have a £500,000 mortgage left, two children at private school (£60,000 a year each going up 20% once the VAT remedy goes soon), and overall lifestyle costs of about £100,000 a year, and that £450,000 of life insurance doesn’t even cover all that mortgage.
OK, don’t panic: you don’t intend to just live on this alone, you have savings and investments. Add the value you think you can get or leave from those into the mix, and your pension, etc. Eventually, you will reach a number, and the calculation is brutally simple: is that number big enough? If not, there’s a gap, and we need to fill it. Oh, and DIS is only valid while you’re in the service of the employer that offered it to you; your cover ends if you leave the company, so it may not even be something you can rely on anyway.
The only person looking out for you long-term is you
I think the point I am making isn’t that you can’t expect any help from your employer if you die in harness, but that the reality of the working life is that this just isn’t high up the C Suite’s agenda—wherever you work, or at least started on payroll. Users of the employee experience site Glassdoor talk about places they used to work on a 0.00-5.00-star rating scale, where 4.01 to 5.00 indicates they were “very satisfied” while employed at a particular place. Even looking at the very top of the 20,000 companies on the chart for compensation and benefits, so 30 companies, literally no-one gets 5—Google comes top at 4.4, CapitalOne 4.1, Microsoft and the US Army both come in at 4, Morgan Stanley and Deloitte 3.9, and Accenture, only 3.6.
In truth, some European banks have very, very good death in service’ benefit programmes, but again they are the exception, not the rule. That must lead us to conclude that while there may be a basis for protection for you under your employment contract, it is almost certainly not going to be enough, i.e., not cover all you want it to. And who says you work for a company any more anyway? You might have been freelancing for years—over 28 million of us were across Europe in 2022, for example, perhaps as digital nomads in the 13 European countries now offering the option.
If you are, then you really can’t look to HR to look after your people and property if something less than nominal happens. The insurers have missed this one, by the way, which makes it even more a logical thing for you to sort on your own; according to Insider Intelligence, gig workers have been massively underserved by financial services because they represent a high-risk demographic. But even if you are in PAYE, surveys show there are relatively low levels of personal life insurance among UK workers, about 30%, and those that do have it often use it only to cover their mortgage—FCA data from 2023 backs this up, and shows the life insurance rate may actually have gone down a percentage point.
Therefore—using logos, like our old pal Aristotle would have approved—we need to conclude that it’s important that you protect your retirement and financial plan against risk, as you can’t rely on others to do on your behalf. Also, by the way, logos also tells you you may well get cancer anyway, but that in 2022 19% of U.S. survivors States have lived 20+ years since their original diagnosis; you might well have quite a long time to keep paying bills even if the worst happens (which is where critical illness and income protection policies come in).
And to get the information you need to protect yourself using, well, protection, speaking to an adviser can help you spot the gaps in your defences you need to shore up in good time—and make the logical, rational economic decisions you owe you and yours.
• This blog is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.
• Benefits of insurance products will be put at risk or cease altogether if premium payments are not maintained.
• Generally, these plans have no cash in value at any time and will cease at the end of the term. If premiums are not maintained, then cover will lapse.
