1 in 4 Brits say they’d face financial ruin if they were out of work for only 4 weeks.

(Source: Drewberry, protection Insurance Survey 2018)


The good news is that there are Protection products out there to deliver a degree of financial support (and comfort) should the unexpected occur, and you’re unable to work due to ill-health, injury, or worse still, death.

Understandably, these are not topics that most people are keen to consider or discuss. And if they do, then protection plans can often be reluctant purchase, where you’re expected to commit money to something you hope will either never happen, or would not occur for many, many years.

Yet, sadly it does. According to research from Drewberry, 1 in 8 of all current 35 year-olds will die before the age of 65!

(Source: Drewberry, Protection Insurance Survey 2018)

As worrying as that figure may be, it is probably more likely that they would face long-term ill-health, injury or a serious illness across the same period. However, if a suitable policy is in place, it may ensure the bereaved family keeps a roof over their head, or that the placeholder is able to fully focus their energies on recovery.


What’s on Offer?

There isn’t really a one-size fits all type of product offering, but broadly there three main areas to consider:

  • Life cover, that pays out a lump sum when you die.
  • Critical Illness Cover, that pays out a lump sum when you have a specified serious illness.
  • Income Protection, that pays you a percentage of your monthly income when you can’t work due to illness or injury.

Of course it’s far more complex than that, when you’re faced with a multitude of insurers, with varying plans, numerous options and added-value benefits. Also, do consider what your employer provides, and how extensive (or limited) that may be.


Consumer take-up Concerns

“It’s too expensive”

Let’s consider an Income Protection plan. In general, if you meet the conditions when off work through illness or injury, this will pay out until you’re well enough to return to work; have retired; the policy ends; or upon your death. Whichever happens first.

To keep a control on costs, let’s look at a a limited payment term plan that pays out for up to two years, if unable to work due to illness of injury. Analysis by Zurich, an insurer, set out that Income Protection cover for a 35-year-old professional earning the average salary of £27,000, and wanting to protect 50% of their net income may only cost the equivalent of one takeaway coffee a week across the course of each month.

(Source: Zurich, Cost of Resilience report, August 2018)

Of course, premiums will be dependent on your own set of circumstances.


“They rarely pay out”

In fact, the opposite is true, as 97.8% of all claims were paid out in 2017, amounting to an average payout of almost £14m a day.

The highest percentage payout is applicable to Life cover (99.5%), but even with Income Protection (87.2%), and Critical Illness (92.2%), the vast majority of claims are settled.

(Source: Association of British Insurers, April 2018 release)

As with all insurance policies, terms, conditions and exclusions will apply.

Not all protection policies should be written in Trust, so do take advice.

The Financial Conduct Authority does not regulate Trust or Taxation advice.