Cost spectre haunts protection

Cost spectre haunts protection

Perceptions of critical illness and income protection cover costing too much is the main cause of their low take-up, according to a survey from Royal London.

A study of 2,000 people found that while a quarter of UK adults have a life insurance policy (26 percent), just 6 percent have critical illness cover and 4 percent have income protection insurance.

For those who did not have these products between just under a third thought they would be too expensive to afford, while around a fifth could not see the benefit of such products.

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While 19 percent believed that insurers would not pay out on income protection in the result of a claim, 18 percent thought the same for critical illness cover and 14 percent for life insurance.

Royal London contrasted these findings with respondents views on how important it was to protect their families financially.  

Two fifths (38 percent) said it was important to ensure that their family and dependents are looked after financially should they die and half (47 percent) agreed that life insurance is essential for anyone with a mortgage or dependents.  

Additionally, Royal London highlighted how the most recent industry figures show insurers paid out in 97.2 percent of all claims.

Debbie Kennedy, group head of protection strategy at Royal London, said: “Just one in 10 people in the UK think income protection is necessary.  Yet they also want to protect themselves and their loved ones should hard times hit. There is clearly more we can do to raise awareness of the positive impact insurance can have on improving the financial resilience of people.”

Kennedy also highlighted how the average life insurance premium with Royal London is £21.28 per month for over £120,000 of cover and the average critical illness cover premium is £30.58 per month for over £71,500 of cover.

Helen Howcroft, managing director at London-based advice firm Equanimity, said she was "not at all surprised by this research".

"Consumers have an inherent distrust of insurance companies which I firmly believe is compounded by articles written in the popular press about policies not paying out in the event of claim.

"We need far more consumer education surrounding protection in order that clients do understand that these plans do pay out provided that you don’t withhold information in the first place.

"Many people believe that “it” will never happen to them and we spend most of our time with clients educating them that “it” may happen. My personal view on cost is that something is better than nothing. If clients perception is that they do not want to afford to have the full level of cover at least having something will give them breathing space when something does happen."