Defaqto launches Star Ratings for income protection
Selecting appropriate income protection products is particularly complicated given the variation that exists between the different options, according to Defaqto's research.
Some 52 per cent of short-term income protection includes employment cover and eight per cent include this automatically while the majority offer it as an option.
Defaqto said that 44 per cent of policies offer unemployment benefit on a standalone basis. Around 53 per cent of policies pay out for just 12 months maximum and the remaining policies offer one or more optional benefit payment terms - 16 per cent offer 18 months and 19 per cent offer 24 months.
Some eight per cent of long-term income protection products have an optional redundancy cover benefit. The majority, 86 per cent, of long-term policies pay out for as long as the policyholder is sick or disabled or until they retire - 20 per cent of these policies also offer a limited benefit option, according to the research.
Around 14 per cent of long-term income protection policies are limited benefit term products only.
Taking a wide range of features and benefits into account, Defaqto gives each product a rating from one to five depending on how comprehensive they are.
Ben Heffer, insight analyst for protection at Defaqto, warned that due to products' "inherent complexity", it was difficult for advisers to engage clients with these products.
He said: "On the flip side, this presents an opportunity for advisers in terms of being able to help clients understand what products are suitable for their needs.
"Our research shows that long and short term income protection policies offer varying levels of cover, excesses, exclusions and additional features and benefits - so it can be difficult for advisers to navigate the market.
"Our Star Ratings for income protection products aim to support advisers by indicating the range and level of features and benefits that different policies provide, which in turn can support their recommendations and allow them to understand where a product sits within the wider market."