Only 16% of full-time workers have income protection – highlighting a significant protection gap despite a modest rise in take-up.
A survey of 2,000 UK adults by Shepherds Friendly found coverage had increased by two percentage points since last year, but income protection remained one of the least-used insurance products.
Among respondents without cover, 81% rented or had a mortgage, 44% had children under 17 and 28% were single, potentially leaving them more financially exposed if they were unable to work.
The research also revealed widespread misunderstanding of the product, with 41% of people without a policy incorrectly believing income protection would cover redundancy.
ADVICE OPPORTUNITY
More than one in five full-time workers aged between 18 and 64 had experienced a period out of work without receiving their usual earnings. This increased to 40% among those aged 18 to 24.
When those without cover were asked what might encourage them to speak to a financial adviser, 28% selected a free consultation and 22% cited the absence of broker fees.
Clear, jargon-free advice and positive online reviews or testimonials were each chosen by 12%. However, 19% said nothing would persuade them to seek advice.
Price remained the most important product consideration for 43% of respondents without cover, although additional health and wellbeing services also attracted interest.
Preventative care and access to services designed to diagnose health conditions were selected by 26%, while cancer screening and physical care such as physiotherapy were each chosen by 25%.
Virtual GP services were valued by 26% overall, rising to 34% among people aged between 25 and 34.
MISCONCEPTIONS PERSIST
Seven in ten respondents had heard of income protection, with awareness increasing with age, although 14% said they did not know what it covered.
Almost half believed regularly drinking alcohol or having an existing health condition would automatically prevent them obtaining cover. This increased to 57% among 18 to 24-year-olds.
Inflation and the rising cost of living were identified by 68% as the greatest threat to their income during the next five years, followed by an economic downturn at 60% and illness or a long-term health condition at 51%.
Almost half (48%) were concerned about the effect of artificial intelligence on job security, while 46% feared an accidental injury could affect their earnings. The latter figure increased to 68% among those aged 18 to 24.
Overall, 38% expected circumstances outside their control to affect their income within five years, compared with 21% who considered this unlikely.
CLEARER COMMUNICATION
Dan Simpson, chief commercial officer at Shepherds Friendly, said: “The findings from this year’s research suggest that low Income Protection take-up is not primarily driven by a lack of awareness.
“Instead, misconceptions about what the product does, concerns about eligibility and uncertainty about its value appear to be preventing many consumers from engaging with protection conversations.
“For advisers, this creates a significant opportunity: education, reassurance and clearer communication could help more clients recognise the value of protecting their income.
“Price remains the dominant purchasing factor, but health and wellbeing benefits are also popular. There is therefore an opportunity for advisers to demonstrate both the protection and wider support available through modern policies to help improve engagement.”
Read the full report HERE.
