Why 3 Million UK Workers Have Income Protection Insurance
Savings, SSP, and Government Support are Falling Short Compared to UK Income Protection Insurance
With each year, more and more UK workers are looking into Salary Protection Policies, but there is still a long way to go until the UK fully realises the importance of protecting your income.
In Drewberry’s 2016 Wealth and Protection Survey, it was found that 1 in 5 people had no idea how they would cope financially if they needed to take time off of work and had no plan to cover their lost income.
Without regular income, there aren’t many viable options that can fully cover your financial obligations. Many of us don’t have savings that are sufficient to last more than a few months while Government Support and Statutory Sick Pay (SSP) tend to fall far short of what’s required, even for those on relatively low incomes.
In other instances, there are people who are completely unable to access these types of support in the first place, and tragically these are often the people that tend to need it most.
A report published by the UK charity, Citizen’s Advice, earlier this year showed just how dire the situation is in terms of many sick and disabled individuals not being fully supported by the government.
The recently introduced Work Capability Assessment has managed to stop many severely ill and injured people from receiving their Employment and Support Allowance (ESA), which means that these individuals that are unable to work have little to no means of income.
In addition to this, Statutory Sick Pay isn’t always sufficient enough to support individuals that are having to take extended time away from work to recover from long-lasting illnesses and injuries.
That’s why over 3 million UK workers* and counting have taken steps to protect their livelihoods through Income Protection Cover. Without a Salary Protection plan, they don’t have many options when it comes to finding reliable income to tide them over if they find themselves too sick or injured to work.
Take a look at the Drewberry 2015 Protection Survey and the Drewberry 2016 Wealth & Protection Survey to read through our findings about UK Income Protection Insurance and the financial lives of UK workers.
Why Would I Need UK Income Protection Insurance?
It’s human nature to avoid thinking about bad things that might happen in the future. We adopt an ‘it won’t happen to me’ mindset. However, by avoiding thinking about potential illnesses and injuries, we waste the opportunity to prepare and minimise the effects of these misfortunes.
Independent Protection Expert
- In 2016, there were more than three times as many people with Pet Insurance (23%) than Salary Protection Insurance (7%).
- In 2015, only 7% of people held a Salary Protection policy.
- More than 1 in 6 people look for Incapacity Protection after they have already fallen ill or injured themselves and been placed out of work.
There are many reasons why people might second guess the need for UK Income Protection Insurance and the most common one of these that we have come across in the Drewberry Protection Surveys is that people tend not to realise how high their chances are of being made incapacitated by an illness or injury.
The risk we perceive there to be of being put out of work due to a severe illness of injury is actually a lot smaller than the actual risk.
Thinking about potential tragedies and accidents is not pleasant for anyone, but sometimes it needs to be done; and rather than not thinking about these things at all, it’s better to feel confident knowing that we have a plan to fall back on just in case.
An illness or injury that we think will take only a few days to heal might take weeks, months, or even years. The Drewberry 2015 Protection Survey found that many UK workers suffer from illnesses and injuries that have a considerable impact on their ability to work and earn regular income.
How Good are UK Income Protection Insurers at Paying Claims?
- 22% of the public would trust a bank most of all to advise them when buying a financial product while only 19% would trust an insurance company.
- 17% of people in 2015 said that they didn’t own Income Protection because they did not trust UK insurers.
- The Association of British Insurers reported in 2015 that £9.4 million is paid out by Insurers every day for protection policies.
Since the 2008 recession, the endless financial scandals that we’ve seen have resulted in an all-time low for consumer trust in financial services and in insurers. The 2016 Edelman Trust Barometer showed the financial services industry being yet again the least trusted industry, with only 51% of the general population considering financial services sector as trustworthy.
As a result of this lack of trust, many UK workers have greatly underestimated the payout rates of UK insurers and this worryingly means that they are missing out on important financial protection.
In Drewberry’s 2015 Protection Survey, the public estimated that only 50% of claims made to UK insurers were paid out that year when the actual amount was closer to a payout rate of 99% for UK insurers. In the latest survey, 48% of people believed that UK insurers have gotten worse at paying claims.
Salary Protection Insurers Continue to maintain Exceptional Payout Rates
The latest figures from the Association of British Insurers (ABI) show that across all insurers, 91.2% of all claims made are met, with the industry paying out over £131 million in 2015 alone.
Even so, leading brokers like Drewberry Insurance will only recommend those insurers with a strong track record for paying claims and who are willing to publish their claim statistics.
To help you compare the best insurers and find the right one for you, we make sure that you can find the Claims Statistics of Insurers all in one place.
Despite people’s mistrust in Insurance companies, the top Income Protection providers continue to uphold a high standard for their claims payout rates. To see the full statistics for UK insurers, see our Income Protection Claims Statistics.
- Aviva pay out £1 million a month in income protection claims.
- Aviva states that its average claim length is 10 years and one month for mental health and 11 years for orthopaedic pain.
- Only 22% of its claims last less than two years in length.
- Aviva paid out £870 million in Protection Insurance claims last year.
- Royal London paid out £156 million in claims in 2016, with an average payout of £83,00.
- In 2016 they paid out a total of 95.6% of Income Protection claims.
- A total of £331 million was paid out in claims in 2016.
- £9,667 was the average amount paid out in claims in 2016.
- LV=’s claim statistics last year were mightily impressive, with a payout rate of 90% for Income protection claims.
- LV= paid out 94% of all new individual protection claims in 2016.
- Their average claim length for income Protection was 7 years and 7 months.
- Their highest annual Income Protection payment was £220,958.
- Vitality in 2016 had an Income Protection payout rate of 94%.
- The most common claim for Income Protection from Vitality during 2016 was mental illness (26% of claims).
- Vitality paid out more than £33 million in claims.
- The Exeter has maintained an incredible 95% 10 year payout rate for Income Protection claims.
- 37% of their 2016 payouts were for injuries and accidents, such as broken bones, fractures and sprains.
- Out of the 6% of claims that were declined, 2% were due to the person still being able to work in their own occupation, and 4% were for non-disclosure.
“Long-term illness certainly is something that none of us want to think about, but it seems many more UK workers understand the risk and are looking at a good quality income protection policy to give them the peace of mind they crave.”
Independent Protection Expert at Drewberry Insurance
UK Workers Aren’t Saving Enough to Live Without Salary Protection
- 55% of people only had enough money saved to last them up to 3 months
- 29% of people don’t have enough money saved to last them a month should they become unemployed
- 41% of people who had less than a month of savings also did not have nay sick pay entitlement.
Our 2016 survey showed that, in the aftermath of Brexit, the majority of people’s concerns revolved around their finances. 47% worried about inflation, 28% were concerned about their wages stagnating, and 39% we worried about going back into recession.
Saving money has become a lot harder in recent years and now UK workers don’t have enough saved to support themselves should they need to take time off work. A shocking 29% of people in the Drewberry 2016 survey did not have enough money saved to last them a month out of employment.
UK Income Protection Insurance is not as expensive as people think, so there is no need to save excessively in order to afford. It’s also possible for you to reduce your Protection Insurance premiums by up to 80% if you tweak your policy.
You can use our Income Riskometer to see for yourself how long your savings would last if you needed to take time off work.
Employer Sick Pay Often Does Not Last As Long As UK Income Protection Insurance
- 58% of employees receive three months sick pay or less.
- 24% of employees would not receive anything above Statutory Sick Pay (SSP)
Statutory Sick Pay is required to be paid by all employers for employees who have been off work for four consecutive days with a maximum of 28 weeks. However, with a weekly rate of £88.45, Statutory Sick Pay wouldn’t be sufficient for most UK workers and isn’t available to the self-employed.
Being out of work for extended periods of time or potentially being out of work permanently can be a scary thing to think about. For professionals who are self employed and for the 24% of people that shockingly do not receive any kind of Sick Pay aside from the minimum that is legally required of their employers, being out of work could mean being almost completely cut off from any kind of income.
To cover this, some people believe that they need only take our some insurance for illnesses, such as Sick Pay Insurance or Critical Illness Insurance. However, these policies sometimes cannot provide the necessary breadth of cover for people that may develop long-term illnesses – or perhaps illnesses and conditions that return recurrently throughout their professional lives.
Government Support Falls Short Compared to UK Income Protection Insurance
- In 2016 25.9% taking part in the Drewberry survey planned to rely on State benefits if they were to suffer from long-term capacity.
- In 2015, median weekly bills of the average UK family came to £208. Families would need to cut expenditure by 48% to survive on ESA.
If after 28 weeks you’re still off work, your Statutory Sick Pay will stop and, as an employed UK worker, you’ll then be able to apply for Employment & Support Allowance (ESA).
With ESA you’re required to go through an initial assessment period lasting 13 weeks, during which you’ll be paid a maximum of £73.10 a week. After this, if you’re found not to be ‘fit for work’, you’ll then be entitled to a maximum of £109.25 per week, far below what the average UK worker would need.
Fewer People Are Eligible For ESA
Employment & Support Allowance is, of course, better than nothing, but it can bring a great deal of stress and inconvenience not knowing whether you’ll initially be eligible for the payment and then having to be reassessed on a ongoing basis to make sure you’re still not well enough to return to work. Understandably, this extra pressure is the last thing UK workers want in their time of need.
That’s why more and more are turning to high quality, good value alternatives such as Income Protection or, in some cases, Critical Illness Cover.
It is also possible to receive both ESA and Income Protection Insurance to bring your monthly income closer to what it was when you were earning.
Why Have Over 3 Million UK Workers Chosen UK Income Protection Insurance?
You Can Align the Protection Cover With Your Financial Liabilities
Income Protection will pay you a proportion of your income (50%-70%) tax free every month if you’re off work due to illness or accident.
You Can Set How Quickly You Need the Plan to Pay Out
Salary Protection policies have waiting periods, so you can link it into any Sick Pay or savings you have to bring the cost down and save you money.
You Decide For How Long You Need Your Plan to Pay Out
UK Income Protection Insurance plans can pay out for as long as you need them to, even up to your retirement age (i.e. claims can last years or even decades, if needed).
You Can Get Own Occupation Cover
Your Income Protection plan will pay out if you can’t perform your ‘own occupation’ (be careful as some providers will only pay out if you’re unable to do a ‘suited occupation’. Use an adviser to find out the best policy for you and fix small details like this).
You Know Your Income is Protected
Your policy will pay out as many claims as are needed under the terms of the policy without the cost of the premium increasing.
Take John as an Example of the Benefits of Salary Protection
John earns £35,000 a year as a sales manager, has essential monthly expenditure of £1,400 per month, and has employer Sick Pay cover of just one month.
John would be able to protect himself for the £1,400 each month and would receive this payment tax free every month when his employer’s Sick Pay ends.
This would allow him to pay his monthly bills and to support himself and his family for as long as required until he’s fit to return to work following his accident or illness.
We are Expert UK Income Protection Insurance Advisers
Drewberry Insurance is a whole of market insurance broker, so we can tailor the cover and choose the insurer best suited to your particular circumstances. This means that, over the course of a year, we help countless hard working Britons achieve the same peace of mind that 3 million other UK workers already enjoy.
Call us on 02084327333 to find out more or compare Income Protection quotes online.
“We exist to ensure you have the information and the support you need when considering your financial protection. We are here to make sure you get it right”
Director at Drewberry Insurance
*Estimate based on the Unum/Guardian ICM poll (2011) finding that 1 in 10 workers have income protection and Workforce Jobs of 34 million in December 2015 (ONS).