Millions of Brits are “dangerously under-protected” – and what you can do if you’re one of them

If you’ve yet to protect your income, health, or family in the event of the unexpected happening, you’re not alone.

New research reported by Mortgage Solutions has revealed that the take-up of protection policies in the UK is “dangerously low”. While 4 in 10 people are concerned about a loss of earnings, fewer than 1 in 5 people have income protection and fewer than 1 in 3 have any life insurance.

The right protection can provide genuine peace of mind that you and your loved ones will receive financial support when you really need it. Read on to find out more about these worrying statistics, and why you should protect yourself now.

Working adults in the UK remain alarmingly under-protected

A new study by a leading building society has revealed the “protection gap” in the UK. The report, Challenging Times: The health and financial fears of UK workers from insurance provider The Exeter said that, despite health and financial fears, working adults remain under-protected.

The research revealed that, while 43% of workers worry about a loss of income – rising to 47% in London – just 17% have or are in the process of applying for income protection policies. Furthermore, only 18% have private health cover while just 31% have life insurance.

The Exeter study also suggests that there is an insurance education gap among British workers.

Almost a fifth (18%) of those questioned said that they did not see the need for a protection product, while 8% said that they did not know what the products were. A further 9% said they would like to know more but did not know where to start.

Self-employed workers more worried about a loss of earnings due to illness than before the pandemic

Perhaps unsurprisingly, The Exeter research found that the pandemic has resulted in self-employed workers being more concerned about a potential loss of earnings due to ill health. 

The study revealed that almost half (46%) of those who run their own business were worried about a potential loss of earnings due to personal illness than in 2019 (34%).

This corresponds with a rising level of income protection for this group of workers, with 17% of self-employed adults now having a protection policy, compared to only 9% in 2019.

Jamie Page, head of protection distribution at The Exeter, said: “The cost of an unexpected illness can have a profound impact on a person’s financial wellbeing. 

“Above anything else, our Challenging Times report has highlighted how, regardless of age or region, workers in the UK are concerned for their health and financial future.

“With such a substantial proportion of people evidently worried about loss of income from illness, it’s up to insurance providers and advisers to make sure consumer education on protection products is reaching as wide an audience as possible and they are aware of the benefits of having a safety net over the monthly cost of paying an insurance premium.”

Self-employed workers at particular risk of financial issues

Owning your own business has many advantages, from working the hours you want to “being your own boss”.

However, one of the key disadvantages of self-employment is that you don’t have the financial safety net often offered by employers to their staff. 

Many employers offer:

• Death in service benefit, where your loved ones receive a lump sum (typically two to four times your annual salary) if you die while working for that employer
• A workplace pension scheme, where the employer will typically make contributions to your pension on your behalf
• Sick pay or income protection that continues to pay you a portion of your income if you are off work due to an accident, illness, or injury
• Holiday pay
• Private medical insurance which can help you access great quality medical care, quickly
• Critical Illness cover, where you may receive a payout if you’re diagnosed with a serious illness such as cancer or a heart attack.

If you work for yourself, you will have to make all these arrangements. You’ll need to set up your own pension to save for your retirement, take out income protection to ensure you continue to receive a regular income if you can’t work, and arrange life insurance so your loved ones will benefit from financial support if you were to pass away.

Despite the many needs self-employed workers have, The Exeter research found that the take-up of insurance among the self-employed was low. Fewer than half (46%) of people who work for themselves have an income protection, health insurance, life cover or cash plan product in place.

3 types of cover you should consider investing in today

Whether you are employed or you work for yourself, this research has shown that there is a significant “protection gap” in the UK.

Without protection you run the risk of leaving yourself vulnerable to a financial shock. For example, if you’re self-employed and can’t work due to illness, your income may dry up completely – and then how could you continue to meet your regular commitments?

Whatever your employment status, here are three types of protection to consider.

1.Life insurance

Perhaps the most important type of protection, life insurance pays a lump sum or regular income to your chosen beneficiaries if you pass away prematurely. It is a valuable safety net that ensures your loved ones don’t have to worry about money at what is likely to be a distressing and emotional time.

Term insurance starts at just a few pounds a month, and pays out a lump sum if you die within a specific term. 

It’s useful if you want to guarantee your family receive financial support if you die within a fixed term, and for providing a sum that your loved ones can use to repay any mortgage on your home.

Alternatively, if you have children and want to provide a regular income, family income benefit can ensure your beneficiaries receive a regular payment if you die.

2.Critical Illness cover

Being diagnosed with a serious illness can be a stressful and emotional time. You might have to take an extended period off work for treatment or to recuperate, while simultaneously having to meet your regular financial commitments.

Critical Illness cover provides a lump sum if you’re diagnosed with a condition covered under your policy. These are serious, life-changing conditions such as cancer, a heart attack, a stroke, Parkinson’s disease, or multiple sclerosis.

The tax-free lump sum enables you to replace income, pay off any debts to give you financial security, or pay for private medical treatment. It can be a really valuable safety net to ensure you don’t have to worry about your finances as you deal with your diagnosis.

3.Income protection

If you’re unable to work for an extended period due to illness or injury, income protection pays a proportion of your income until you’re fit enough to return to work.

It can be particularly valuable if you’re self-employed as you don’t have the back-up of sick pay from your employer.

Income protection typically pays up to around 60% of your salary and you can choose how soon you’d like the cover to start – this is typically 8, 13 or 26 weeks.

Get in touch

As this research shows, British workers are worryingly under-protected. So, if you want the peace of mind that you and your family would receive financial support when you really need it, investing a few pounds a month can be worthwhile.

We’re protection experts and work with dozens of the UK’s leading insurers – the likes of Aviva, Legal & General, and Vitality – to find you the right cover at the right price.

Get a life insurance quote or a Critical Illness cover quote now or get in touch with one of our experts to find out more.