Consumers warned over failing to protect their incomes
A survey by income protection provider Cirencester Friendly, found that 64% of advisers said that their clients find it difficult to understand income protection products while 63% said on the whole their clients aren’t clear on what income protection actually is.
Paul Hudson, chief executive of Cirencester friendly, said: “The responses we have received from financial advisers in this survey show there is a need for more education and awareness for consumers when looking into protection products.
“Some providers have ventured into advertising on television to raise awareness of the need for income protection insurance, which is great but some campaigns suggest that you get income protection from your employer.
“While group income protection is a benefit provided to employees of larger organisations, many workers do not have access to this type of benefit and may not be aware of the individual income protection products available from specialist providers.”
The research also found that 85% of advisers believe income protection is a must have for their clients yet 2011 sales figures published earlier this year show critical illness is being sold more widely than income protection.
Sales of new critical illness policies were almost five times that of income protection contracts in 2011.
Hudson continued: “The danger is that a person with critical illness cover may assume that they do not need income protection.
“Critical illness pays a lump sum if a policy holder contracts an illness from a specified list which can vary from product to product, it will not cover loss of earnings due to an accidental injury or less serious conditions that could stop a person working and earning a living and can be equally damaging financially.”
The survey also highlighted cost (55%) and clients not thinking they needed the cover (60%) as the biggest barriers to recommending income protection for financial advisers.
Many advisers believe that better educated consumers would encourage them to sell more income protection products and over half of those asked (58%) called for the industry and the Government to lead the campaign to raise awareness of the product.