Is the price right?

Similarly, the treatment for pensions plans also depends on individual circumstances and each provider's rules. It is possible to take benefits from a pension while also receiving payment from an income protection plan, if necessary, up to the normal end of the contract. Peter Chadborn, a director at CBK in Colchester, says, "Sensible financial planning would be, if the person does not have to take the pension immediately, it would be best to defer it for as long as possible." As was discussed earlier, this would mean that using an income protection policy that can pay benefits to age 70 would help to maximise the amount saved in a pension pot.

Breaking through

Last year saw sales of income protection policies increase for the first time in several years, but this has done little to diminish the so called 'protection gap', which is the difference between the amount of policies in existence and the number that the industry believes are needed.

Closing this gap, currently valued at £190bn by Swiss Re, will not be easy. Awareness levels are low and the application process can be lengthy and daunting, not only putting off advisers but also their clients. Add to this the perception that it is an expense without a tangible benefit if no claim is made.

But things could change as products evolve. Streamlined underwriting methods that have shorter application forms or full tele-underwriting could simplify this process, while the introduction of shorter benefits terms in exchange for lower premiums may convince a greater segment of the population that this product is economically viable. These progressions notwithstanding, not all policies come with expensive premiums, as this survey has demonstrated, while there can also be the prospect of a lump sum payout at the end of the contract if desired.