Income Protection Cover is Lacking for Millions of People

Reading an article in today’s Express newspaper, I was not surprised to see how millions of people are failing to protect themselves adequately in the event of falling ill or losing their jobs.

The reason why is that they do not trust insurers to give them a fair deal. According to research by Defaqto, the market analyst, consumers doubted whether insurance companies would pay out for claims on income protection policies.

Defaqto's Nick Telfer is quoted as saying: "Consumers do not trust the insurance industry to pay out and underwriters believe that people prefer being ill to going to work."

Still, claims figures show that claims on income protection policies are settled at a high rate.

Simon Burgess from specialist protection insurance provider BritishInsurance.com says that many people are often sold the wrong type of cover. For example, payment protection insurance (PPI) is almost a watered-down version of income protection and is often aggressively sold alongside credit cards, loans and mortgages.

Burgess said “Income protection cover replaces lost earnings, typically due to unemployment or illness. However, PPI only goes towards repayments of specific credit deals. This means that PPI is often mis-sold to those who do not need it or are ineligible to claim.”

As an example, he cites someone who is self-employed being sold a policy that will cover them for redundancy only.

“I am very worried that people are potentially at financial risk due to the fact they cannot trust the insurer and therefore will not take out protection. It is the lender’s responsibility to provide the right type of cover to their customer, and at a price free from hiked up commission charges.”