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The rise and rise of the ‘protection gap’ in the UK

The chances are that over the past 5 years or so your life circumstances have changed. Perhaps a new job; or you’ve bought a house; or you got married or had a child, or maybe all of these things. As our responsibilities in life increase, so does the financial pressure on our family situation if circumstances change, perhaps because of illness of loss of employment. This is where protection insurances are able to bridge a ‘gap’ that help ease the burden on family life in case of emergency. In 2012 the Association of British Insurers estimated the shortfall in cover to be a staggering £2.4 trillion. Such an eye-watering figure is rather meaningless and difficult to decipher, but it does help make a point that as a society we are woefully under-protected if the worst should happen.

According to a 2015 YouGov survey of over 2,000 individuals, 60% have no form of life insurance cover. Only 12% have critical illness cover. Many people believe that their employer has a role to play in providing a number of these insurance products and covers. However, amongst the same YouGov study, over 50% of employers felt it was not their role to engage with employees regarding financial insurance protection. The main reason people do not take out any form of cover is affordability. 34% of respondents said they could not afford such cover. Tom Rees, Director at YouGov, commented that policies needed to be “affordable and worthwhile” for families to consider such an option. Indeed, over the past few years many insurers have considered how best to market such products. Protection policies have been sold on the basis of ‘what if’ and ‘if the worst should happen’ and families begrudgingly take cover out and forget about the cover, not wanting to think about negative possibilities. But for those individuals not taking out cover either because the perceived cost is prohibitive or because the thought process is unsettling, there are a number of insurers that are offering incentives to families and are making the products a more inclusive part of daily life. These incentives include things like discounts at gyms, discounts on purchasing bicycles, free counselling, free wills, numerous vouchers at various shops and discounts on other insurances like car insurance and home insurance.

The purpose of insurance protection products, be that critical illness cover or life protection, is not to scare people in to thinking the worst will happen but to provide a level of financial continuity when other instabilities in life may arise. It’s why at Grange Mortgages we encourage people to consider these insurance products, to help give you and your family peace of mind. And what’s more, the sooner in life you consider such a policy the more cost-effective it can be. According to Daniel at Grange: “Policies can be incredibly good value if purchased in your 20’s and 30’s, but the truth is there is no bad time to take out a policy as it’s always likely to be cheaper this year to take out a policy than it will be next year.”

 

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