There was some positive news recently when a new survey revealed that the coronavirus pandemic has resulted in an increase in interest in financial protection.
Almost one in five people are now more likely to put life insurance in place, and there has also been a big increase in the number of Brits considering Critical Illness cover and income protection.
However, despite the huge benefits of protection, the numbers of people actually taking out cover remain low. Indeed, the study found that more people insured their pets in 2020 than took out life, health, and income protection combined.
If you’re thinking about protecting yourself and your family, read on to find out why some of the reasons you may be reluctant shouldn’t stop you.
More people insure their pets than insure their life, health, and income
Despite a recent survey finding that people are now more interested in financial protection, the numbers who took out cover in 2020 were still low. Just under one in 10 people took out life insurance, less than 4% of people put some Critical Illness protection in place, and just one in 100 bought income protection.
As a comparison, 16% of people bought pet insurance – representing a higher number than everyone who bought life, Critical Illness, and income protection combined.
It seems as if people understand that their pets might have a health condition, or be involved in an accident, and that this could result in a substantial bill.
However, many Brits don’t seem to apply this logic to themselves and consider that they too might have health problems which have financial implications – particularly if they have to stop working.
If you’re diagnosed with a serious illness, and you had to take an extended period off work, could you survive on Statutory Sick Pay (SSP) at £95.85 per week? Could you pay your rent or mortgage, and your household bills? What happens when the SSP period of 28 weeks ends?
And what if you’re self-employed? If you were unable to work, your income could dry up completely.
Many Brits still confused about life insurance
One of the conclusions of the recent report was that much confusion remains when it comes to life, health, and income protection.
We’ve previously looked at some of the myths about life insurance, and why much of what you think about getting protected might not be true. This latest report highlights two of the key reasons many people don’t take out cover, and the confusion that reigns.
Firstly, many people still believe life insurance is expensive. The study also found that 70% of people think the cost of life, and Critical Illness cover has risen since the pandemic began. More people have died, so surely the cost of insurance is now higher?
No. Firstly, people generally overestimate the cost of life insurance. In an earlier study in 2018, when asked how much a particular (fairly standard) policy would cost, the average estimate for the premium was £42.74. The actual premium was £14.35, so the average person overestimated the cost by almost 200%.
There’s also little evidence that the cost of cover has risen due to Covid-19. While seven in 10 people expect the cost to have gone up over the last year, this is not the case.
Tom Conner from the firm who carried out the research says: “We have not found this to be the case either. Throughout the pandemic we’ve continued to arrange Critical Illness cover for clients, without seeing a spike in premiums.”
The second key myth that stands in the way of many people taking out the protection they need is that “insurers don’t pay claims”.
Nearly half (44%) of people surveyed said that they believed insurers paid out on fewer than half of all Covid-related claims. Furthermore, one in seven people said that this refusal to pay out was the main reason they wouldn’t take out this type of protection.
Again, this is not true. Figures from the Association of British Insurers have revealed that 96% of all personal life insurance claims relating to Covid-19 were paid in 2020, along with 99% of group life insurance claims.
You can read more about the extremely high claims payment record of insurers on our blog.
Tom Conner continues: “Clearly, there’s work we need to do as an industry to improve clients’ perceptions of protection. At the moment, it seems too many clients see financial protection as not only expensive but also unreliable. As long as this persists, people will continue to be put off buying cover that could make a huge difference to their lives in a time of need.”
Why the right protection can offer you greater peace of mind than simply saving more
An interesting finding of the recent study was that, rather than putting the necessary protection in place, more adults are trying instead to boost their savings.
56% of people were trying to put more money aside as a result of the pandemic, with three in five saving “for a rainy day” and a quarter in case they lose their job.
While it’s admirable that people are trying to save more, this may not be the best way to protect yourself against a financial shock or short-term disruption. An emergency fund is essential, but will it protect you if you developed a long-term health condition?
What happens if the worst happens, and you passed away – would there be enough in your savings for your family to be financially secure?
Putting the right protection in place – cover that may well be much cheaper than you expect – remains an excellent way of ensuring you and your family are protected. It gives you the peace of mind that financial support will be there when you most need it and, as we have seen in the last year, that could be at any time.
We’ll help you find the right cover at the right price
As we have seen, life insurance, Critical Illness cover, and income protection are both cheaper and more reliable than you might think. So, it’s vital you put the right cover in place to protect your loved ones.
We work with dozens of the UK’s leading insurers to find the right cover for you at the right price. We scour the market for the best rates, and we even take less than the standard commission from insurers to pass further savings onto you.
Whatever your situation, we can help you find the right protection. We’re particularly experienced at helping you if:
- You are looking for life insurance with a pre-existing medical condition. We work with insurers and underwriters to find the best terms we can, even if you have experienced health issues in the past
- You want life insurance but are considering moving overseas to live or work even for a short time
- You live in a crown dependency, such as the Isle of Man, Jersey, or Guernsey and you want life insurance or Critical Illness protection.
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