Protection insurance is a crucial aspect of financial planning, and there’s almost no time more important to review your protection needs than when arranging your mortgage. After all, buying a home is of the biggest financial and emotional commitments we can make in our lives. However, several myths surrounding protection insurance often lead to misconceptions and, in some cases, prevent people from making informed decisions that could otherwise protect them or their families in the best way. Below I will aim to debunk some of the common myths associated with protection insurance.
Myth 1: “ These Things Never Pay Out – Insurers Always Find a Way Not to Pay”
Think protection insurance won’t deliver? Think again. In the 2022, the Association of British Insurers revealed an impressive £6.85 billion in payouts. And this is not the only reassuring statistic. With an overall claim acceptance rate of around 98%, these policies stand strong and challenge the misconception that insurers don’t pay. When you factor in this percentage is for life, critical illness and income protection claims combined, it’s clear to see these policies offer diverse and impactful support and the pivotal role they can play in supporting you and/or your family can’t be emphasised enough.
Myth 2: “I’m Young and Healthy, I Don’t Need Protection Insurance”
Another prevalent misconception is that protection insurance is only for older individuals or those with health issues. In reality, unexpected events can happen to anyone, regardless of age or health. What’s more, often the reality is that the younger you are the less provisions you’ll have in place – such as savings – leaving you more vulnerable in the event that something unforeseen happens. Having protection insurance in place ensures that you and your loved ones are financially secure whatever may be thrown your way.
Myth 3: “My Employer’s Coverage is Sufficient”
While many employers offer life insurance as part of their benefits package, it’s often a basic policy and not tailored to your needs. Relying solely on your employer’s coverage can leave you underinsured, especially if you have dependents or mortgage debt. One of the risks of relying solely on your employer’s cover is that you’re only covered whilst you’re employed by them. If you suffered a long term or serious illness that meant you had to have your contract terminated and be replaced in your role, and then discovered that this illness became terminal, you and your family would be left without valuable protection that could save your home.
Myth 4: “I Don’t Have Dependents, so I Don’t Need Insurance”
More than ever income protection is finding its rightful place in the market as an extremely important policy. For the single person with no dependants, it’s unlikely there’s a policy that’s more crucial. Your bills rely solely on your ability to work and earn an income. If something physically and medically stops that from happening then income protection will carry on paying you your personal sick pay so that you can maintain your bills until you can return to work.
Conclusion
Understanding the realities of protection insurance is crucial for making informed financial decisions. By debunking these common myths, individuals can recognize the importance of having comprehensive coverage that aligns with their unique circumstances. Whether you’re young or old, single or with dependents, protection insurance is a valuable tool in safeguarding your financial future. Having a review with an experienced protection adviser will allow you to learn the best ways to cover your biggest risks and concerns. Speak to a member of John Charcol’s in-house expert protection team on 023 8235 2300. We’ll help set up the right cover to protect you and your specific needs.
