Defaqto Extends Star Ratings for Income Protection

Defaqto is in the business of analysing financial product data to provide adviser and provider firms with comprehensive knowledge on a wide range of products, including Income Protection Insurance. They have comprised a new Star Ratings system for various short-term products available in their already existing database for long-term protection products.

Defaqto, an independently run research company, has come out with a new Star Rating system for short-term Income Protection, in addition to their existing Star Ratings for long-term income protection. This new ratings system will enable advisers to ensure better product matching for clients by comparing featured offers by various protection products.

Their research indicates that the selection process for income protection products can be exceedingly complicated since there is a wide range of variation among the differing product options available. Defaqto’s research has shown:

For Short-Term Income Protection:

• 53% of policies limit their payout length at 12 months while 19% offer optional payment terms of 24 months and 16% of plans will offer 18 months;
• 44% of policies will offer a standalone unemployment benefit;
• 52% of policies include unemployment coverage. Note: only 8% will provide this coverage automatically while the rest offer it as an option.

For Long-Term Income Protection:

• 14% of policies are predominantly limited-term products;
• 86% payout for the duration of a sickness or disabling condition, or until retirement. While 20% of these will also offer a limited-term benefit option;
• Also, an optional redundancy coverage benefit is only offered by 8% of income protection products.

Why is all of this significant to the average consumer? Using the 1-5 star system, which is dependent upon the wide assortment of benefits and features that are available for both short-term as well as long-term income protection insurance, Defaqto’s 2011 Star Ratings will give policy advisers a comprehensive amount of information on the overall level of benefits and features available.

The research covers nearly 2,000 providers and over 30,000 products of short-term and long-term income insurance products on the market. It will give a level of confidence to the consumer that they will receive the plan that is right for them.

Income Protection (sometimes know as accident and sickness insurance) is a vital insurance product for almost any individual. Unfortunately, many people realise this only when it is too late to do anything about it. Almost everyone with a salary to protect has the ability to take out this type of insurance, which pays out a level tax-free income if the policyholder is unable to work due to sicknesses or disabilities.

In fact, many experts in the business of financial planning strongly believe that this insurance should be an essential foundation for most people’s financial planning.