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How robust are the alternatives to Income Protection?

30/05/2024

Mike Farrell, Protection Sales and Marketing Director

Earlier this year, we released our Reaching Resilience report, based on a survey of 4,000 UK adults1. The survey found that over half of the working population would feel more financially resilient with Income Protection or Critical Illness Cover. However, only 5% of employed people and self-employed people would actually rely on an insurance policy (like Income Protection or Critical Illness) paid for by themselves.

Infographic - 1 in 10 workers have no savings at all

I’ll rely on my savings

Most commonly, 46% of employed respondents and 45% of self-employed respondents would rely on savings if they could not work. Unfortunately, one thing that stood out in our findings was that of those surveyed, 40% of workers held less than £5,000 in savings and 1 in 10 have no savings at all. In comparison, our most recent claims data shows that as of December 2023, the average length of an LV= Full Income Protection claim was 5 years and 10 months2 - far longer than typical savings would realistically last.

Will I be covered by sick pay?

Other than savings, 32% of employed people said they would rely on sick pay from their employer. We know that UK employees making more than £123 per week are eligible for £116.75 a week for 28 weeks of statutory sick pay from their employer (as at April 2024). 

While some employers offer sick pay schemes that exceed legal requirements, how many would pay for several years or even until retirement? Consider the length of our average IP claim - would their employer pay for that long?

 

I have a high credit limit

After savings and sick pay, 10% of employed and 4% of self-employed respondents said they would use loans or credit cards to cover outgoings if they were unable to work due to illness or injury. While this may cover short bursts of illness, it is not a long-term solution.

11% of employed people expect to rely on state benefits or universal credit if unable to work

Won't benefits cover me?

According to our Reaching Resilience survey, 11% of employed people and 8% of self-employed people would rely on state benefits during extended illness or injury. As it stands in April 2024, UK workers who become long-term sick and unable to work, and rely on state benefits alone could receive a typical income of only £393.45 a month of Universal Credit4. In comparison, with Personal IP they could receive up to 60% of their regular income until they can return to work, right up until the end of their policy with a full policy, or for up to two years for each claim with a budget policy.

 

Protecting income

Framing the weaknesses of alternatives can be an excellent way to make your protection conversations more impactful.

"The Reaching Resilience report highlights that many workers aren’t as financially resilient as they might consider themselves to be and shares findings you can use to raise awareness of the protection gap."

Mike FarrellProtection Sales and Marketing Director
1Reaching Resilience Report: Data used in this report comes from a survey of 4,000 nationally representative UK adults conducted for LV= by Opinium in between 23 November and 3 December 2023.
2LV= Claims report 2023
3Full Personal Sick Pay claims only
4This is based on receiving Employment and Support Allowance and being in the work-related activity group. Based on 32-year old, no mortgage or savings, who is not claiming other benefits.
 

Income Protection Solutions

Without an income, most people would struggle to maintain their lifestyle, leaving them and their families vulnerable if they’re unable to work due to illness or injury.

Learn more about our Income Protection Solutions 

Reaching Resilience

This report explores how financially resilient workers consider themselves to be and delves into what their plan B would be if they couldn’t work due to illness or injury.

Read our Reaching Resilience report

Contact us

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