In a state
Consumers need help to better understand the benefits of taking out protection products according to State of the Protection Nation a new study released today from Royal London. The research finds that many barriers to buying protection products are due to perception and can be overcome with better education. The study of 2,000 people found that while a quarter of UK adults have a life insurance policy (26%), just 6% have critical illness cover and 4% have income protection insurance.
For each product, the same barrier is top, price – with nearly one in three who don’t have life insurance, critical illness cover or income protection saying they think the products are too expensive (29%, 32% and 31% respectively). Analysis of premiums Royal London customers pay reveals the average life insurance premium 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.
The second most common barrier was people not seeing the benefit of the product. Yet almost two fifths (38%) say it is important to ensure that their family and dependents are looked after financially should they die and half (47%) agree that life insurance is essential for anyone with a mortgage or dependents. This shows that with better education, from the industry and advisers, more people could be better protected.
The third barrier is not trusting insurance companies to pay out in event of the claim. Yet the most recent industry figures show insurers pay out in 97.2% of all claims.
The research reveals that more people see a need for the products than actually have them, suggesting that with greater action on the barriers the UK could be better protected. While one in 10 (9%) say they see the need for income protection just 4% hold it and while 12% say they see the need for critical illness cover, just 6% hold it. For life insurance, however, take up matches perceived need, where 27% see the need and 26% hold it. Those with children under 18 are much more likely to believe that all three types of product are needed, in particular critical illness cover (21% compared to 9% who don’t have children).
Royal London also found more work needs to be done to help people understand what could happen to them during their working life. According to the research, respondents were more likely to think they will die (22%) within their working life than be made redundant (15%), contract a serious health condition or illness (15%), go on sick leave for three months or more (11%) or have an accident preventing work (9%). Yet a quarter (25%) of those polled had been made redundant or lost their job at some point, whilst one in seven (15%) have been off sick for three months or more or been diagnosed with a serious health condition or illness.
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