The private insurance industry has been able to make solid headway in educating and engaging consumers with regards to fully protecting themselves and their families against any eventuality. This process has become particularly relevant due to large cuts in public sector welfare spending.
The main thrust of concern with most private insurance is to ensure that the people who need it the most are adequately protected. Obviously, consumers with families to take care of in the wake of the illness, injury or even death are in need of protection most.
8.5 Million Individuals without Income Protection
In terms of income protection insurance (sometimes known as salary insurance), there are 8.5 million households in the UK who are at risk, according to a recent survey conducted by Scottish Widows.
The warning is that we are vulnerable to financial hardship by not having this form of insurance. Many adults are arguing that they are protected by the welfare state, and while this is a true to a certain extent, income protection is not designed to replace government support, what it is designed to do is enhance the meager benefits available. This is a lifestyle insurance to make sure that in the case of being unable to earn an income – the same lifestyle may be maintained.
Millions without Back-Up Plan
In a poll of 5,148 adults, Scottish Widows found that 33% of the control group would be unable to cope financially if they lost their main source of income. Despite this, only 7% of the population in Britain are covered by an income protection policy. The take-up of this particular private insurance protection product is extremely low and more people insure their mobile phones and their pets’ health.
It is very important to consider protecting the earnings of the key household breadwinner. Without such protection it usually leaves people unable to support their families in a way in which they have become accustomed to.
In the UK, 44% of all households are dependent on two salary incomes and in households with mortgages the dependency on two salaries is even higher at 51%. In the survey, 23% of the people not covered for loss of income believe they will simply cut back on general expenditure in the case of one income being lost; which is not a very practical approach given average household expenditure relative to income and savings.
As Vital as Life Insurance
Income protection is relatively expensive compared to life insurance and this is one of the reasons why far fewer people take out this cover. The desire with life insurance is to protect the dependents of the principle breadwinner in the case of his demise, the concept of income protection is to protect the principle breadwinner while he is still alive, and provide the same protection for their dependents.
However, there are many options with this type of cover to bring the premiums down to an affordable level. For example, short-term income protection limits the amount of time the plan can payout to 12 or 24 months. It is usually the case that some level of protection is better than not having any cover at all.