Most of us will take out some form of protection insurance at some point in our lives, to ensure the family’s finances are secured if the breadwinner becomes too ill to work – or worse.
But new research reveals that those who take out life insurance are less likely to get different types of coverage — even if that means that leaves them unprotected when things go wrong.
Exclusive research for This is Money by Cirencester Friendly Society found that those with life insurance and critical illness coverage are less likely to purchase income protection even though the three policies are very different.
Income protection has never been a bestseller – in part because it’s seen as more complex, more expensive, and paid monthly rather than all at once.
Income protection insurance is designed to cover your salary if you cannot earn income due to illness or injury, unlike life insurance which pays your dependents upon your death, or critical illness which pays a lump sum if you receive a diagnosis of an illness that appears on a pre-agreed list.
Income protection has never been a bestseller – in part because it’s seen as complex, more expensive, and paid on a monthly basis rather than a one-time lump sum.
Only 17 percent of people currently have income protection and research findings suggest that having a life or critical illness cover discourages people from taking it out.
Of the 2,005 people the community surveyed, 39 percent said they wouldn’t consider getting income protection if they already had some form of life or serious illness coverage.
This percentage rises to 51 percent for those between the ages of 45 and 54.
About 28 percent said they would get income protection even if they already had critical illness and life insurance, while 18 percent would do so if they already had life insurance but no critical illness coverage.
Conversely, 15 percent said they would do so if they had critical illness insurance but no life insurance.
David Macgregor of the Cirencester Friendly Society said: “I think it’s a combination of product confusion and the issue of cost, as well as the issue of priorities and the ‘it wouldn’t happen to me’ element.”
Customers can easily relate to a claim of potentially serious illness, as most will know someone who has had a heart attack, stroke, or been diagnosed with cancer.
While we do see and pay claims for these illnesses, in 2018 we paid more than 38 percent of our claims as a direct result of an accident, 7.9 percent for mental health and 13 percent for musculoskeletal-related conditions, such as ill health. their backs and joints.
Generally, these conditions would not be paid under the critical illness policy, which McGregor argued “clearly highlights the need for coverage under both to ensure complete protection and peace of mind.”
Some employers offer death in service as an employee benefit
Do you need income protection?
Around one million people a year find themselves unable to work because of injury or illness, according to the trade body the Confederation of British Insurers.
Income protection protects against this by paying you if you can’t work because of an injury such as a back injury, stress, or a chronic condition such as multiple sclerosis.
Unlike critical illness coverage, it doesn’t pay you a lump sum — instead it will provide you with a monthly income of up to 80 percent of your salary until you are healthy enough to return to work or retire.
Some experts argue that this little-known form of coverage is actually the best form of protection insurance if the right is purchased.
But they can be very expensive, and some people may not really need them. If you have enough savings, or your partner has enough income to cover the bills, this may not be entirely necessary.
Some employers will also offer some form of this insurance as an employee benefit, so double check with them before you take out any additional cover.
Talking to an independent consultant may help you determine if this is a policy you would actually benefit from.
Luke Barber, Cavendish Online Protection Consultant, said: ‘Ask yourself a question – before you retire, do you think you’re more likely to die, be diagnosed with a serious illness, or suffer an illness or injury that prevents you from working for an account for a few months or more?
The answer is the latter. It may be for a short period of time, or at worst you may never be able to work again.
“While income protection is an insurance cover that is taken up by very few, it is most likely to be claimed at all.”
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