When it comes to protection insurance it can be difficult to separate fact from fiction. That’s why we’ve decided to debunk some of the most common myths and share some of the best tips.
If you’re still not sure which insurance product is the right choice for you, you should consider talking to a financial adviser.
Insurance companies don’t pay out
One of the most common myths about protection insurance is that policies seldom pay out. This is a myth.
Data from the Association of British Insurers (ABI) shows that in 2018, 97.8% of all individual claims were paid out.
In the same year the insurance industry paid out an average of £13m a day for individual life, critical illness and income protection insurance claims.
The most common reason why insurance claims are declined is non-disclosure of information by the customer.
For example, saying that you don’t smoke, when in fact you are a social smoker, or not telling your insurer about a potential medical condition as you’re still waiting for test results from your doctor.
If you’re not sure whether a certain piece of information is relevant always tell your insurer. It’s simply not worth the risk.
It doesn’t matter if you don’t tell your insurer everything
It is necessary for you to tell your insurer everything relevant.
Not being open about something might knock a few pounds off your monthly payments, but could also invalidate your policy.
So if you take part in a dangerous sport, or you have a history of health problems, you need to share this information with your insurer.
Common reasons people don’t disclose relevant information, include:
- waiting for a test result
- they are/were a social smoker
- unsure how much alcohol they drink
- answered for their partner who wasn’t present
- embarrassed to discuss an issue in front of a partner.
The golden rule is that if you’re not sure about something, it’s always best to tell your insurer.
The state will take care of me
Don’t expect the state to replace your income if something goes wrong.
If you can’t work because of an injury or illness you might be eligible for Employment and Support Allowance. Payments depend on your circumstances and the seriousness of your illness or disability.
Find out more about Employment and Support Allowance.
I can’t afford it
Protection insurance is generally cheaper than most people think and in the majority of cases, some cover is better than none at all.
Life insurance policies, for example, can provide you with cover from just a few pounds a month.
It’s well worth weighing up the cost against the potential benefits, including peace of mind and financial security for you and your family.
I’ll never need it
It’s tempting to think that you’ll never need insurance, but unfortunately no one is immune to things going wrong.
- According to Mind one in four people in the UK will suffer from a mental health problem this year.
- Every year close to 1m workers in the UK unexpectedly find themselves unable to work because of injury or illness.
- Studies by Cancer Research UK have shown that one in two people born after 1960 will be diagnosed with a form of cancer during their lifetime.
These figures can give you an idea of how important it is to make sure you and your family have a financial safety net in place should something happen to you.
Use our FAQ guide, which covers the basic questions that you might want to ask an adviser, or the questions they will ask you.
Get the right insurance policy
There are many different types of insurance products which you might consider, depending on your personal circumstances.
- Life insurance will offer financial support to your dependents if you die unexpectedly. Do you need life insurance?
- Income protection insurance can provide you with support if you find yourself unable to work. Do you need income protection insurance?
- Critical illness cover will support you if you’re diagnosed with a specific type of serious illness. Do you need critical illness cover?
- Short-term income protection insurance provides cover when you find yourself unable to work for a short period of time. Do you need short-term income protection insurance?
- Payment protection insurance (PPI) is designed to cover payments on debts if you find yourself unable to work due to illness, injury, or if you’re made redundant. Do you need payment protection insurance?
Find out what type you might need in our guide Securing your financial future.
If you’re still unsure which insurance product is the right choice for you, consider talking to a financial adviser.
Read the small print and know what you’re buying
Once you know what type of insurance you want, make sure you pick the policy that best suits your needs.
Don’t just opt for the cheapest one available, do your research and find out what each policy will actually cover you for.
For example, if you don’t have any dependents you might not need a life insurance policy, but you could have a small one to cover your funeral costs.
Keep your policy up to date
Your circumstances might change from when you first took out a policy.
You might move to a larger house with a bigger mortgage, have a child, or, you might change job and receive a more generous benefits package.
These are all reasons for you to review your insurance policy and work out if it’s still providing the right amount of cover at a competitive rate.
It’s also worth comparing your monthly payments to what’s available on the market to make sure you’re paying a competitive rate.
Don’t assume you’ll find the best deal on a price comparison website
Price comparison sites are a great way to get an idea of what’s on the market, but they might not show you a full range of providers and products.
Some insurance companies choose not to appear on comparison sites and others only appear on a few.
It’s also worth noting that comparison websites will not always provide the level of guidance or information which you need before making a decision.
So arm yourself with some knowledge about the products you’re interested in before you start running comparisons.
Where can I find out more about financial protection?
Ensuring peace of mind by making sure you have a safety net for when something goes wrong, is always a good idea.
Use the links below to find out more about protecting your financial future:
- Securing your financial future
- How much does protection insurance cost?
- What financial protection might you already have?
This article is provided by the Money Advice Service.