Laura Hassall at Shepherds Friendly breaks down common misconceptions around the value of income protection
Despite income protection being a hugely beneficial way to secure your income should any unexpected circumstances occur, Shepherds Friendly have conducted a survey, revealing that just a small proportion of Brits are investing in this worthwhile insurance policy.
The full study can be found here
Only 14% of Brits have income protection, meaning 86% are leaving themselves vulnerable should they find themselves unable to work. Despite 2.8 million people in the UK being economically inactive due to long term sickness or injury, a survey from Shepherds Friendly has found that less than one in six Brits have income protection.
Looking at demographic splits, just 11% of women hold this policy compared to 17% of men whilst 15% of 35-44 year olds have income protection despite this demographic being the most likely to have a mortgage. In comparison, 37% of Brits have life insurance, meaning more Brits are protecting their loved ones in the event of their untimely deaths than they are when it comes to protecting their finances during their lifetimes.
Almost a third of Brits regret not taking out income protection
When asking people whether they regret not taking out income protection insurance, almost a third (29%) of Brits agreed. Looking at this by age group, 43% of 25 to 34 year olds and 38% of 35-44 year olds agreed. Additionally, 47% of those with income protection said they wished they had taken out the policy sooner, suggesting many came to understand its benefits and capacity to provide protection once taking out the policy.
Common misconceptions around income protection include its cost, and its necessity in the face of sick pay and youth
There are many common misconceptions around the value of income protection. Below, Shepherds Friendly have outlined three of the most common myths, and the reality behind them.
Myth 1: Income protection is expensive and, therefore, isn’t worth it.
Reality: The monthly price of income protection policies can start from less than £5 a month and will cover from 50-70% of your salary depending on the provider. Whilst the amount you pay can increase depending on your circumstances, the long-term benefits can be substantial if you find yourself unable to work.
Myth 2: Sick pay will cover you if you can’t work.
Reality: Whilst employers must pay statutory sick pay to all employees who are eligible (which is currently £116.75 per week), this is limited to only 28 weeks in total. This amounts to just £3,269 and tax and national insurance will be deducted from this. For many people, this isn’t sufficient to cover life’s necessary expenses.
To put this into perspective further, the average monthly wage in the UK is £2,950 before tax and national insurance deductions. If you insured 70% of this with income protection, you could take home £2,065 if you were off work with long-term sickness or injury. This means that if you are on the average UK wage, you could take home £24,780 per year, 658% more compared to if you only had Statutory Sick Pay.
Myth 3: Income protection is necessary for young and healthy people.
Reality: Accidents and illnesses can happen at any time of life. Shepherds Friendly’s survey found that just 9% of those aged 18-24 have income protection, however a recent study in 2024 found that people in their early 20s are more likely to be economically inactive due to ill health than people in their early 40s, and 34% of people aged 18-24 have taken time off work in the past year due to poor mental health.
Laura Hassall at Shepherds Friendly adds: “Despite most of us relying on our income to pay for essential living expenses, it’s surprising to see just how many people in the UK are apprehensive to take out income protection. Income protection will help provide you and your loved ones with a financial safety net if you’re unable to work due to illness or injury. Accidents and health issues can occur very unexpectedly, and it’s often after the fact that we wish we had been better prepared.
“In today’s economic climate, many of us will be prioritising our shorter-term financial needs, such as paying off bills or saving for a holiday. As a result, there isn’t a wide understanding when it comes to what long-term financial protection nets there are to help prevent you from being unable to pay for necessities if you lose your income due to long-term sickness or injury. Besides focusing on short term financial goals, we will often prioritise other areas of risk by taking out pet and phone insurance, without considering insuring our income. Seeing as it’s our income that pays for these things, many of us would find ourselves unable to financially fund them if our income was cut off.
“No matter your age, it’s important to consider what the benefits of income protection could mean for you. However, if you own a home or have loved ones who depend on you, income protection could be even more vital. If you’re unsure which policy is right for you, you can always speak to a financial advisor to help you plan the best way to prepare for any unforeseen circumstances in the future.”
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