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Cost stops people buying protection products

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25/01/2017
Cost is the top barrier to people not buying protection products, a study by insurer Royal London reveals.

Nearly one in three people who don’t have life insurance, critical illness cover or income protection said they thought the products were too expensive.

Analysis of premiums Royal London customers pay reveals the average life insurance premium is £21.28 per month for over £120,000 of cover, while the average critical illness cover premium costs £30.58 per month for over £71,500 of cover.

The second most common barrier is people not seeing the benefit of the product, despite 38% saying it is important to ensure family and dependents are looked after financially should they die and 47% agreeing that life insurance is essential for anyone with a mortgage or dependents.

Royal London said better education from the industry and financial advisers would mean more people are better protected.

The third barrier is not trusting insurance companies to pay out in event of the claim. Yet, according to the latest claims statistics from the Association of British Insurers (ABI), insurers paid out 97% of all claims in 2015.

The findings also suggest more people see the need for protection products than actually have them.

One in ten see the need for income protection but just 4% hold it and 12% see the need for critical illness cover but just 6% have any.

When it comes to life insurance, take up matches perceived need with 27% seeing the need for it and 26% holding it.

Debbie Kennedy, group head of protection strategy at Royal London, said: “Our research shows that people are far more likely to think they will die during their working life than be hit by redundancy or critical illness, yet statistically it is far less likely.

“Official statistics show that more than four times as many people were made redundant than died early, showing the importance of having cover beyond life insurance.”

 

Protection products explained:

 

Life insurance

 

Life insurance will pay a defined lump sum to your loved ones when you die. The money can be used for anything – household bills, child care costs, mortgage payments or even funeral expenses.
Critical illness

 

Critical illness cover will pay a defined lump sum if you are diagnosed with a life-threatening or critical illness such as a heart-attack, cancer or stroke. Some policies will cover against serious injuries or loss of limbs or mobility. The money can be used for anything.

You can only make one claim on this type of policy.

Income protection

 

Income protection will pay a monthly sum if you are unable to work due to any illness or injury. The money tends to go towards essential outgoings. You can make multiple claims on this type of policy.

 

 

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