New research from the ABI shows that nearly a quarter of people have no idea how they would cope should they lose their regular income.
Insurance can play an important role in helping people to meet their financial commitments.
The ABI commissioned NMG Financial Services Consulting to explore protection needs in the UK. 2,000 face-to-face interviews combined with 16 in-depth discussions with households in a particularly vulnerable situation
The report finds that many people have no strategy in place to provide for themselves and their family should something happen that causes the primary income earner to lose their regular income.
Those who do have a strategy in place often have unrealistic expectations of how they will be able to manage, for example overestimating the level of benefits they would receive from their employer.
The most vulnerable groups include single income families, single parent families, larger families and single women aged 18 to 35.
Insurance can significantly improve the situation for households that experience a loss of income because of unemployment, illness or loss of life.
Those that had taken out insurance had often been prompted to think about their protection needs at the time of key events in their lives, for example when buying a house and taking out a mortgage.
A protection gap is when households do not have sufficient insurance or other coping strategies in place to match the loss of income resulting from unemployment, illness or loss of life.
Key barriers cited by households to taking out insurance were:
Affordability – particularly for lower incomes where accommodation costs, food and clothing were higher priorities. Not surprising when the banks and building societies offer cover at inflated prices and often unsuitable policies too.
Confidence – a lack of confidence in whether policies would pay out and were uncertain about contract details. Not surprising when many policies are complex, badly explained and very confusing as to when and what amount they pay out. Even experts struggle on some insurer offerings, no wonder the public is confused. There are good, simple, inexpensive policies out there. All you have to do is look at the range on our site.
Advice – lack of neutral sources to obtain information about purchasing products.
All you have to do is look at our site
Income protection: News update: February 2008