Insights

8th January 2024

More than 50% of young people have some form of income protection (IP) in place, according to new research carried out by Opinium for National Friendly.

Younger people are also more likely to consider taking out IP cover (43%) compared to 30% for 35-54 year olds and just 11% for those over the age of 55.  

Overall, the research found seven in 10 UK workers did not have any form of income protection (IP) in place, highlighting the need to educate consumers on the benefits of protecting their income as well as on the different options available.  

The Opinium research surveyed 2,000 adults and found that younger people had a better understanding of income protection than their older counterparts.

Young people aged 18-34 years old are more likely to take out Accident Only Income Protection (AOIP) cover than any other age group, the research said, with 51% having some form of cover in place to protect their income in the event they are unable to work due to an accident.  

But such protection appears to be less popular with older people, and compares to 28% for those aged 35-54 years old and just 14% for those over the age of 55.

It means that some 72% of 35-54 year olds and 86% of workers over the age of 55 could be financially vulnerable should they find themselves unable to work in the event of an accident.  

And more than a quarter (26%) of those without AOIP said they prioritise their spending on other necessities, while 32% said they have never thought about it and 29% believed they would be unable to afford cover.  

The figures suggest many UK workers still consider insurance to protect their income an expensive luxury or afterthought, instead of an important part of ensuring their financial freedom in the event of ill health.  

A total of 16% of respondents believed their employers would still pay most of their income if they were absent from work.   

Educating consumers and debunking the myths surrounding IP is therefore crucial, particularly given the fact that 67% of all UK workers have not protected their income despite playing a huge role in the workforce.  

When it comes to AOIP, only 38% of advisers said they have recommended it to a client. The remaining 62% are either unaware of the product and its price point, or only view it as an option in situations where full cover cannot be considered.  

Commenting on the research, Jo Miller, co-chairwoman of the Income Protection Task Force, said: “Starting by stating the obvious, full IP has to be the preference but as with short-term IP, I think AOIP also has its place in the market.   

“I’ve had conversations with advisers who see it as a good option for certain types of clients (e.g. blue collar, manual workers) who resist the full option or cannot get full cover.  

“For me, it’s about the presentation by the adviser – the full option should be presented first and adapted according to client response and in that sense, AOIP would have its place for some clients where budget or personal circumstances mean that something is better than nothing.

“Regular reviews by advisers would also give the chance to upgrade cover.”  

Graham Singleton, CEO at National Friendly, said: “Being unable to work due to an  accident can result in a loss of earnings that can have a serious impact on a person’s quality of life, particularly their financial wellbeing.  

“While the findings of the research are worrying and highlight the many misconceptions surrounding AOIP and the IP sector as a whole, it is reassuring to see that 51% of 18-34 year olds already have cover in place, as these are the people with the majority of their working lives ahead of them.  

“However, more needs to be done to encourage take up and understanding of AOIP among the wider workforce, particularly those aged 35 and over so they can continue to pay for essential day-to-day living costs and bills if they find themselves unable to work due to an accident.  

“This will be a core focus for our business moving into 2024.” 

National Friendly launched its low-cost accident only income protection (AOIP) product with no medical underwriting more than two years ago in May 2021 

The insurer said at the time that its new policy was aimed at clients who had not been able to find the right cover due to cost or perhaps their health. 

This article was originally published on Health & Protection. Visit their website here.

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