The survey of 2,000 adults found that although most full-time workers are aware of income protection, only a small proportion currently hold a policy, with many believing their health or lifestyle would prevent them from being accepted.
Shepherds Friendly’s survey, carried out in October, found that just 14% of full-time workers have income protection. Take-up is highest among those aged 25-34 at 20%, followed by 18% of 35-44-year-olds. Cover is less common among older age groups, falling to 10% for those aged 45-54 and 7% for those aged 55-64.
Awareness of income protection remains high at 70%, suggesting that low uptake is not simply a result of workers being unfamiliar with the product. Instead, the findings point to widespread misconceptions about eligibility. Almost half of respondents (47%) believe that factors such as physical or mental health history, lifestyle or ongoing investigations would automatically lead to an application being declined. This view is most common among those aged 35-54, at 51%.
Respondents highlighted several factors they believe would prevent someone being accepted for income protection. These include chronic conditions such as diabetes or arthritis (40%), past medical issues such as surgery or hospitalisation (37%), undiagnosed conditions under investigation (37%), drinking alcohol regularly (33%) and having a mental health condition (30%).
There is also uncertainty about what income protection covers. While 69% understand that it pays out if someone is unable to work due to illness or injury, 42% incorrectly believe it pays out in the event of redundancy. Some 13% think it pays off a mortgage, 12% believe it pays a lump sum on death and 12% assume it covers medical bills.
The research also indicates that many workers lack awareness of other financial support available if they are unable to work. Some 69% of full-time workers did not know the level of statutory sick pay. After being told it is currently £118.75 per week for up to 28 weeks, 27% said it was lower than expected. While 45% said their employer offers sick pay above the statutory minimum, 34% said theirs does not and 21% did not know their entitlement.
Phil Nash, chief sales officer at Shepherds Friendly (pictured), said: “It’s well-known that income protection is underutilised, but it’s often assumed this is due to a lack of awareness. The results of this survey were therefore striking in revealing the level of misconceptions surrounding the product. It is concerning that so many workers are misinformed, not just about IP but also about the other financial safety nets available if they are unable to work, whether from the government or their employer.”
According to the Association of British Insurers, 97% of income protection policies are sold with advice, highlighting the role advisers play in addressing these misconceptions. Nash said: “It’s clear there’s a real opportunity here for advisers and intermediaries. If they can educate their clients on what Income Protection covers, as well as highlight the potential gaps in the other support available in the event of illness or injury, there’s a significant chance more workers will see its value. Increasing the take-up of IP would represent a huge step forward in improving the financial resilience of the UK’s workforce.”
The survey also explored what might prompt workers to seek advice about income protection. Cost transparency and ease of access were the strongest motivators, with 24% saying they would engage with an adviser if they knew the service was free, and 23% citing a free consultation. Clear, jargon-free advice was a motivator for 14%, while 21% said nothing would persuade them.
Engagement drivers vary by age. Social media presence and online reviews were influencing factors for 18-34-year-olds, at 18% and 15% respectively, compared with lower levels across all age groups. Younger workers also appear more open to advice, with only 5% saying nothing would persuade them to speak to an adviser, compared with the overall figure of 21%.
The research also found younger workers are more likely to consider a mutual provider. While 38% of all respondents said they would be more likely to consider a mutual for income protection, this rose to 60% among 18-24-year-olds and 56% among those aged 25-34.
