Other research outlines the importance of IP when measured against other protection products. Data from Royal London assessed the odds of a 30-year-old non-smoker who plans to retire at 65 being off work for two months or more. It found a 37 per cent likelihood for women, falling to 26 per cent for men. Meanwhile, the chance of contracting a critical illness is 13 per cent for men and 11 per cent for women, and the likelihood of dying is 4 per cent and 3 per cent, respectively.
The figure also emphasises the importance of consumers getting the right type of cover for their needs, as many confuse IP with CI and vice versa. IP aims to replace a proportion of the policyholder’s income, which will often be needed until they either return to work or retire. By contrast, CI aims to pay out a lump sum on the diagnosis of a specified illness and is, importantly, not dependent on whether the policyholder is fit enough to work. Therefore, CI policies should be used in circumstances where large sums are required, such as clearing debt or paying for specialist medical treatment.
Many people, however, will prioritise finding a replacement income. This is especially the case for sole traders, who will not have access to employer benefits to support them. That said, company employees should also pay due consideration to the need for IP, as employer sick benefits are far from a bottomless pit.
The distinction between IP and CI is therefore crucial, as otherwise consumers may find themselves claiming a policy that fails to provide the cover they expected.
Just can’t get enough
For this year’s survey, a total of nine providers with 18 plans between them have taken part, although some of these plans have been amalgamated in certain tables. Individual policy details are shown in Table 1 and highlight the wide-ranging cover on offer. Interestingly, only two providers – Shepherds Friendly and Vitality Life – allow cover to start at age 16. All the others, with the exception of LV which is 17, have a minimum age of 18.
For most, the maximum age that a plan can be started is 59 – British Friendly’s policy is the exception in that it accepts applicants up to the age of 64. However, consumers looking to take out cover in their 60s are likely to face extremely high premiums due to the increased likelihood of making a claim.
