Is income protection worth it? (yes!)
One of the questions we get asked a lot here at ActiveQuote is: “Is income protection worth it?” It’s a good question and we understand why our customers want to know; an income protection plan isn’t a legal requirement, as is car insurance, and it’s not needed as a condition of your mortgage, as home insurance usually is. But, with protection insurers paying out a record-breaking £5bn in claims last year, we’d argue that, alongside life cover and critical illness insurance, it’s a very handy type of cover to have indeed!
Latest figures from the ABI show that insurers paid out almost £14m per day in income protection, critical illness cover and life assurance in 2017 - a £340 million increase year-on-year. What’s more, nearly 98% of claims were paid, while the number of payouts increased by more than 20,000 compared to 2016.
The total value of claims paid for critical illness passed £1bn for the first time ever, with the average claim increasing to £73,000. Of the critical illness claims made for cancer, 96% were paid out, providing a lifeline to policyholders at one of the most difficult of times of their lives.
Income protection is designed as a safety net should you lose your job through no fault of your own, have an accident or become too ill to work for a while. There are different types of policy, including mortgage protection, redundancy cover, accident and sickness insurance and loan protection, and the right one for you will depend on your outgoings, lifestyle and priorities.
Similarly, life insurance and critical illness cover are there to help and support you and your loved ones should you become seriously ill or pass away. Although none of us likes to think it will happen to us, these protection insurances can be vital in allowing you to stay in your home or get back on your feet following an illness or bereavement.
In addition to individual claims, the latest figures also show that a record number of families were supported with a financial payment following a group insurance claim. Nearly 5,000 people were helped back to work following a period of sick leave, while a further 7,900 were assisted through referrals to help and support, with cancer and mental health issues being among the main causes of claims.
ABI health and protection head Roshani Hewa said: “Protection products provide vital financial support in people’s time of need. To see that the industry has collectively supported families with more than £5 billion in 2017 for the first time ever is incredibly positive.
“A serious injury or illness can be traumatic but, with insurers paying out on more than 97% of claims, consumers can rest assured that they’ll have the support they need if the worst happens.”
Among our partner insurers, Royal London paid out more than 99% of all claims received in 2017, amounting to more than £517m in total. Nearly £175m was paid in life and terminal illness claims, with an average of nearly £113,000 per claim. More than 97% of term life insurance claims were paid, while more than £128m was paid in whole of life insurance claims and 99.9% of claims were paid.
Last year Royal London’s income protection cover was extended to include fracture cover and hospitalisation benefit, as well as being extended to the age of 70 for some occupations, to reflect the fact that people are living and working for longer.
Legal and General paid out a total of £636m in protection claims, across life, critical illness, terminal illness and income protection - the equivalent of £1.74m per day and a £30m increase from 2016. Included in this figure was a total of £313m paid out in life claims - an average of 25 claims a day - and £209m in critical illness claims. L&G also paid out 93% of children’s critical illness claims, with the largest payout being £25,000.