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Do you know the limitations of your insurance policies?

Ignorance really isn’t bliss when it comes to protecting your health, wealth and family. Yet a worrying number of people aren’t insured if they lose their main source of income. Do you have the right protection in place?

More than 15 million UK adults would be financially at risk if they lost their main source of income, according to a recent study by financial advice website Unbiased.co.uk. That’s three in ten. But I don’t believe the figures.

I’m not questioning the thoroughness of the research, but I do challenge whether people really know and understand the cover they’ve got. I bet the true figure is far higher than 15 million.

Are you really protected?

We’ve done our own research into people’s perceptions of protection insurance, and it turns out that having a ‘bit’ of cover doesn’t mean you’re protected – even if that one policy is good.

Our research found that while 41% of people have some form of life insurance, only 9% have either full or short-term income protection insurance, and only 13% have critical illness cover. Compared with the 16% who have private medical insurance, 11% with mortgage payment protection insurance and 7% with PPI, those figures sound fairly low.

In my view, these three non-essential insurances do not constitute ‘being protected’ and could be giving people a false sense of security.

Always check the small print

There’s also evidence that lots of people don’t understand the products they’re paying out for. For example, 30% of people who actually have an income protection policy wrongly believe they’ll be covered if they lose their job.

And of the 41% of people with life insurance, 10% think it pays out for illnesses that last more than 12 months, but this is usually only true if your illness is terminal.

Which? Conversation commenter Chris Hargreaves shared his negative experience with the wrong type of cover:

As a consumer you buy a product with the faith that it will do what it’s supposed to do. I was in a critical state and the only people who disagreed were my insurers who said if I could hold a pen this policy would not pay out.

Household budgets are under strain at the moment. Forking out for non-essential protection insurance while failing to insure what’s really important is a false economy, and potentially disastrous if things do go wrong.

Have you checked the small print to find out exactly when your insurer will and won’t pay out?

Comments
Member

Although a slight aside to Life/income replacement insurance.

Surely the next scandel to come, is the banks adding in ‘free’ travel insurance on their accounts. I have 3 accounts/cards with different banks all have written confirming (as I understand it) that I have european travel cover as part of the account (now that I deposit enough per month).

I do wonder if I/someone ever needed it, would it pay out ?
As I have never been checked for my previous illnesses etc , and nowhere does it say I have to – it says I have it (or have they mis-communicated this ? does teh congratulations I qualify for/now have access to mean I an actually uncovered ? )
– personally I already have worldwide cover before the offer, but if I did have to rely on it…

a thought. will become a mis selling issue (even if it is ‘free’),
I know I would prefer some cash in my hand than 3 duplicate/overlapping policies saving me 120 pounds (so they say).