Is Income Protection Insurance worth it?

Protection insurance has a very real impact on people’s lives, providing a sense of normality in the most trying circumstances. Too often, however, it can be seen as removed from reality.

In this article we discuss the topic of Protection Insurance, explore some myths and cover the benefits to help you make a more informed decision when you come to select the right product for you.

What is protection insurance?

Protection insurance is a generic term typically used to describe insurance policies which provide cover for you and your loved ones in the event of your death or illness. Typical policies include life insurance, income protection and critical illness insurance.

What are the benefits of Income Protection Insurance?

There are several reasons why you might want to consider protecting your income, along with many types of cover. From sickness cover (Critical Illness) to accident or unemployment, this type of policy helps offer additional security so if something unexpected happens, your monthly outgoings are covered.

An important question to consider is “how would I cope financially if I lost my job or were unable to work?”.

If you and your family rely on your income to cover regular household bills, an income protection policy can ensure your lifestyle would remain unaffected if you were ever unable to work.

Even if you have built up some savings buffer, it could soon disappear if you’re out of work for a long time.

How popular is Income Protection Insurance?

One in ten British adults has taken out or considered taking a protection policy, a rate that rises to almost one in five for those aged 18-34. This is an encouraging figure – but it still leaves millions missing out on protection.

A variety of myths, ranging from price concerns to availability, still prevent many from seeking vital cover.

Despite the over-50s age group being more susceptible to COVID-19 complications, two thirds had no life cover during the pandemic, a recent report has revealed.

Is income Protection expensive?

Putting protection in a real-world context is the key to judging its true value. Upfront and accessible discussions can help you to understand the role protection can play in your personal and professional life.

For example, income protection can start from as little as £10 a month, about the same as a streaming subscription. Or, at less than £2.50 a week, this can be cheaper than one takeaway coffee.

When you compare the cost of protection to real-world examples, it can make the expense seem more affordable and ground it firmly in daily life.

Do Protection Policies pay out?

As well as comparisons for cost, imagining how protection could benefit yourself and your family can further sharpen its appeal.

If you can picture yourself in a time of need or put yourself in the position of someone who has benefited from protection insurance, it can hit home much more than cold figures about the financial incentive.

Do you think that protection plans rarely pay out? Well, here are some facts. The value of an average protection payout now sits at £14,994, while one leading company paid out 98.2% of all claims in 2021. This shows that, in the real world, millions of people are benefiting every day from their protection plans.

When is the best time to take out Protection Insurance?

It can be difficult to know the right time to take out protection. Many people delay seeking insurance until they think they might need it. Indeed, most mortgage holders say it would take an unexpected change in circumstance to occur before they would consider purchasing protection.

As with all types of insurance, however, premiums generally vary according to age and state of health so being young and healthy means you’ll probably get a better deal. Getting a policy early on in life gives you vital protection for longer – and can be cheaper in the long term.

Note: As with all insurance policies, conditions and exclusions will apply

Data Sources:

  • LifeSearch
  • Association of British Insurers
  • Aviva
  • Metlife UK
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