I think most of us should have income protection insurance. Yet in reality, very few of us do. So why are we still so distrusting of income protection insurance providers?
Many income protection providers pay out on more than 90% of the claims made to them – one of the highest payout rates of all insurance products.
Yet, the reputation of income protection is being undermined by those insurers that still sell cover to their customers based on ‘activities of daily living’ (ADL).
ADL policies aren’t up to scratch
ADL policies only pay out if you’re unable to carry out basic tasks associated with daily living such as, say, walking a certain distance, dressing yourself or being able to read 18-point print. To make a successful claim on an ADL income protection policy, you have to prove that you’re unable to do a certain number of everyday activities on your insurers’ checklist.
These ADL policies are often sold to those in risky occupations. And frankly, they’re not up to scratch. To make a successful claim is extremely difficult as there are so many conditions – so why pay for a policy you’re never likely to use?
Public awareness of ADL is rising – one anti-ADL Twitter account, for example, has now garnered almost 14,000 followers. This is the protection industry’s big chance to prove it can provide a great product.
Get better protected
So what other types of income protection policies are there? ‘Own occupation cover’ pays out if you’re unable to do your own job and is the highest quality product. Next best is a policy that pays out if you’re unable to do a ‘suited’ job, while ‘any occupation cover’ pays out if you’re unable to take any type of work at all.
The ever-shrinking government safety-net will probably make more people consider taking out income protection, as state benefits are becoming restricted or withdrawn altogether. And yet, I’m often asked why more people don’t buy income protection.
One of the answers is that they don’t trust the whole protection insurance industry in the wake of the PPI mis-selling scandal. Selling impractical ADL policies is giving income protection a bad name when, for most people, it should be amongst the most vital types of insurance they have.
We’re investigating income protection, good and bad, right now. Have you taken out an income protection policy? If you haven’t, what is it that’s putting you off?