Many homeowners misunderstand the support available if illness, injury or redundancy leaves them unable to work, research from LifeSearch and HomeOwners Alliance has found.
Almost one in five homeowners, 19%, believe state support would be sufficient if they could not work, rising to 42% among under-35s.
The research found that more than one in five homeowners, 21%, believe employer sick pay removes the need for income protection, while 47% wrongly think income protection would pay out if they were made redundant.
LifeSearch and HomeOwners Alliance said the findings pointed to confusion over the role of the state, employers, redundancy and income protection, leaving households exposed if they are unable to work.
REDUNDANCY MISUNDERSTANDING
The biggest misconception concerned what income protection is designed to cover. Almost half of homeowners, 47%, believe this type of cover would pay out in the event of redundancy, although it is intended to cover illness or injury rather than job loss.
The misunderstanding was highest among those who already hold a policy, with 61% of homeowners with income protection believing it would pay out if they were made redundant.
STATE SUPPORT ASSUMPTIONS
The research also found that 19% of homeowners believe income protection is unnecessary because they think they would receive sufficient government support if they were unable to work due to illness or injury.
This rises to 22% among mortgage holders and 42% among under-35s.
Statutory Sick Pay currently stands at about £500 a month, while self-employed people are not entitled to it.
One in six homeowners, 16%, also incorrectly believe that holding an income protection policy would prevent them from claiming Statutory Sick Pay through their employer. This rises to 28% among those who currently own an income protection policy.
EMPLOYER SICK PAY CONFUSION
More than one in five homeowners, 21%, believe that occupational or enhanced sick pay means they do not need income protection. Among under-35s, the figure rises to 34%.
LifeSearch and HomeOwners Alliance said enhanced sick pay and group income protection can provide short-term support, but may be discretionary, limited in duration and linked to an employer rather than the individual.
Debbie Kennedy, chief executive of LifeSearch, said: “Too many homeowners think they’ve got a safety net in place, when in reality, they’re relying on assumptions that don’t hold up – whether that’s expecting support if they lose their job, or overestimating what sick pay will cover.
“What we see every day is that the gaps aren’t complicated – they’re about clarity. A good adviser helps people understand how everything fits together, from state support to workplace benefits and what happens if those change or disappear when they move jobs.
“No one should be finding out how limited that support really is at the point they need it.”
Paula Higgins, chief executive of HomeOwners Alliance, added: “Homeowners work hard to buy their homes, but too many may be relying on assumptions about financial support that do not match reality.
“A mortgage is usually a household’s biggest monthly commitment, yet this research shows widespread confusion about what state support, employer sick pay and income protection actually cover.
“The most worrying finding is that nearly half of homeowners wrongly think income protection would pay out if they were made redundant. That misunderstanding could leave families badly exposed at the worst possible moment.
“Homeowners need clear, practical advice so they understand what protection they have, where the gaps are, and how they would keep paying the mortgage if illness or injury stopped them working.”
