You’ve probably bought insurance to cover your home, car, pet, or even your mobile phone. Yet many of us fail to financially protect ourselves and our families from the potentially devastating impact of a serious accident, illness, or death.

While thinking about getting ill or dying may seem gloomy, ensuring your loved ones are at least financially prepared for such an eventuality can provide you with valuable peace of mind.

However, there can be plenty of misconceptions around protection that may prevent you from taking out cover.

Here, we consider some of the most common myths, and what the reality is.

Myth 1: Policies never pay out

One of the most common myths surrounding protection is that policies won’t pay out in the event of a claim. People presume that insurers will do anything they can to wriggle out of paying up, even if a claim is entirely valid.

However, official industry figures do not support this assumption. Latest figures from the Association of British Insurers (ABI) show the UK insurance industry paid out £6.85 billion in protection claims during 2022. This includes life insurance, income protection and critical illness insurance. That’s a total of 98% of all protection claims resulting in a payout.

The average payout across the industry, according to the ABI, amounted to £73,578 for life insurance, for example, while the average payout for income protection insurance was £21,913. The average value of critical illness claims stood at £66,296.

The most common reason for an insurance policy failing to payout across the industry was because the policyholder has failed to inform an insurer of relevant health information that resulted in a claim, also known as “non-disclosure”, so always be upfront when applying for cover.

Myth 2: Protection insurance is too expensive

The cost of any protection policy depends on the level of cover you want, and a variety of other factors, such as your health and age. However, cover may be more affordable than you think, and there are usually plenty of competitive deals available if you shop around and compare policies from a range of different insurers. 

According to comparison site Insurance Hero, the average price of a £100,000 level life insurance policy with a 30-year term would be, £28.81 a month for someone aged 50, assuming that the person applying for cover is a healthy non-smoker. Premiums jump to £60.11 a month for the same aged person if they’re a smoker. Of course, the actual amount you’ll pay depends on your personal circumstances and requirements, and so may be lower or higher than this.

Like any type of insurance, it’s best to compare the cost across a range of insurers, whatever type of protection policy you’re buying. This could see the price fall dramatically, and premiums can usually be tailored to your budget by tweaking the details, such as how much is paid out, or the term.

Some types of life insurance cost more than others, too. Term life insurance is usually less expensive than whole of life cover for example, as it runs for a set term rather than until you die. Find out more in our article What are the different types of life insurance?

Myth 3: I don’t need this type of cover

It’s easy to take an ‘it won’t happen to me’ approach to life, or believe that as you’re currently fit and healthy, there’s little need for protection insurance. Besides, contemplating your own mortality isn’t a pleasant thought. However, like any form of financial planning, it’s important to think about what may lie ahead, and this includes what would happen if you were to suffer an accident, illness or pass away.

Read more about the value of life insurance, for example, in our article Why life insurance matters.

You should think about what would happen if, for example, you didn’t have insurance and you were to die unexpectedly. Depending on your personal situation, your family may be unable to pay the bills, or even risk losing their home if they couldn’t keep up with mortgage repayments. Alternatively, what would happen if you were forced to take a long period off work because of an accident or injury? You may be unable to pay your bills if you don’t have insurance that pays out a lump sum or monthly income to help you cover your costs.

Myth 4: I’m already protected through work

You might have some protection cover included as part of your employer’s benefits package. This may be, say, death in service cover which typically amounts to around four times your annual salary, or company income protection insurance.

Of course, it’s important to check what you’ve already got as a starting point before paying out for a policy. Bear in mind, however, that even if you have some insurance in place through your workplace, this may not be enough to meet your family’s financial needs if you weren’t around. Does it provide enough to, for example, pay off your mortgage, and clear any debts, alongside meeting everyday spending needs? You may want to top up any benefits your employer provides, depending on your situation.

It’s also important to remember that you’re unlikely to work for the same employer forever, as according to the Department for Work and Pensions, we work for an average of 11 different employers during our lifetimes. That means if you move jobs, cover from your current employer will cease and your new employer may not provide it as a benefit, in which case having your own standalone policy could prove invaluable.

Read more about what to consider in our article Do I need life insurance?

Myth 5: My family or partner will look after me

You may hope that your loved ones would naturally help if you were unable to work because of an accident, illness or disability. Hopefully, this is the case, but life’s twists and turns means that circumstances can change, and it’s best not to rely on other people as a financial safety net.

Also, your partner or family may be very able and willing to help pay the bills and look after you for a period of time, but this may not be financially sustainable long term, and could place further strain on what is likely to already be a tricky time.

Myth 6: I’m over 50 so I won’t get cover

You can still get cover, but it gets more expensive the older you are. If you’re buying any form of protection insurance in your 50s and 60s you can expect higher premiums, but it may be worth the outlay for peace of mind. Find out more in our article Life Insurance for over 50s explained.

Like any insurance, it’s wise to shop around for the best policy and price for you. If you have any pre-existing conditions, and that’s preventing you from getting cover, try seeking help from a free specialist life insurance broker to find cover.

There are plenty of specialist life insurance policies aimed at people aged over 50s, and sometimes, you don’t have to answer any health questions or take a medical test. If you have a family history of poor family health, or you’ve suffered an illness, this could be an option that’s worth exploring.

Myth 7: I have a pre-existing condition so I can’t get cover

You can still buy protection if you’ve got a pre-existing medical condition, such as high blood pressure or diabetes. An illness or condition could affect your chances of getting cover with some insurers, or mean higher premiums. However, provided you disclose any pre-existing conditions to a broker, they can search the market to see which providers may offer you a policy. Bear in mind though that any policy you do buy will usually exclude any pre-existing illnesses or conditions you have.

Don’t conceal any medical issues you have as it’s really important to be upfront about your medical history. After all, you don’t want your policy not to pay out when it’s most needed, and if your insurer finds out you haven’t been entirely honest, your cover may be invalidated.

Myth 8: I’ve got a risky job so I won’t get cover

Your occupation, how risky it is and therefore how likely you are to suffer an accident or illness at work, will have an impact on the cost of a protection policy. Yet there are specialist policies available if your job is considered particularly high-risk to an insurer, such as construction or manual work. You can tweak a policy to suit you though, and find ways to reduce the cost. For example, in the case of income protection, you could extend the period the policy pays out, or reduce the amount of income you’d receive to lower the cost of your premiums .

If you’re self-employed and working in a job that’s considered high-risk, protection can be particularly important, as you won’t receive this benefit from your workplace. So, if you have an accident at work, you could be left seriously out of pocket. In particular, you might want to consider income protection insurance, which will pay out a monthly income in the event of illness or disability until you’re well enough to return to work, or you retire. Find out more in our article Income Protection Explained.

Myth 9: I only work part-time so it’s not worth getting cover

If you earn more than you would receive in government support if you were unable to work because of an accident or illness then it may be financially wise to consider protection insurance. Think about what impact your death would have on anyone left behind, or what a long-term loss of income would mean for your loved ones if you were unable to work.

If you’ve got a two-income household, the loss of either income could be financially detrimental. If you’ve got younger children or grandchildren living at home with you, and you were unable to work or no longer around, additional childcare costs can also add up. If you’re no longer around, your partner may be forced to give up their job or reduce their hours to take on childcare or other caring responsibilities, perhaps for elderly parents, if you’re no longer around.

Myth 10: Payouts are taxed

If you receive a payout from a life, income protection or critical illness policy, this won’t usually be subject to income tax. However, depending on your estate’s value when you die, this money may potentially be liable to inheritance tax (IHT). Find out more about inheritance tax in our guide Understanding Inheritance Tax. You can ensure that any payout is not considered part of your estate on death, though, by placing your policy in trust.

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