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IP Myths and Misconceptions

For a subject that sounds pretty dry, income protection insurance can actually be a very emotive issue.

David Smith
Content Writer

Talk to anyone about income protection insurance and the conversation is likely to be awash with misunderstandings and inaccuracies. People trade anecdotes about their bad experiences or something someone once told them. In a way this isn’t surprising – the general  insurance industry has a reputation that’s more ‘Shady Scammer’ than ‘White Knight’.


Why the bad rep?


We don’t think insurance deserves the bad press it receives and income protection in particular is often misunderstood. A lack of knowledge has combined with unfounded suspicion to create serious resistance. And yet, as we never tire of repeating, Which? magazine called income protection insurance “the one protection product every working UK adult should consider buying”.


Why? Because it protects one of your most important assets: your income.


And yet, scepticism about the value of income protection insurance persists, with familiar myths being frequently repeated. So let’s look at the most common misconceptions surrounding income protection insurance and find out the truth.


Myth No 1. Income protection is a waste of money


We take insurance for granted when it comes to the most valuable things we own but we forget that without our income we can’t even pay the bills, let alone buy luxury items. The sudden loss of your income can have devastating consequences in every corner of your life. With Income Protection,  you’re not only improving your future financial security, you’re gaining / getting peace of mind.


Myth No 2. I have sick pay, and it’s all I need


A lot of people assume that their employers or the government will look after them if they can’t work but they haven’t read the small print. Statutory sick pay is £109.40 a week and lasts for just 28 weeks. That’s just £3,063 and you even have to pay tax and national insurance on it. What’s more, no employer is obliged to pay more than this.


Myth No 3. I don’t need income protection because I have critical illness insurance


Income protection sounds similar to critical illness insurance but they operate very differently. Critical illness is limited to situations in which you’re diagnosed with a life-threatening condition. Income protection covers you for any illness or injury that prevents you from working, so it has a much wider application.


Myth No 4. Income protection is expensive


Everyone has their own idea of what ‘expensive’ means, but compared to many other demands on your money, IP is not high on the list. A policy that will replace your income until you can go back to work could cost as little every month as a couple of streaming subscriptions.


Myth No. 5 I’ll never need it


2.5 million people every year* have to stop working because of illness or injury and they fall into every age category. They probably didn’t think they’d have needed it either, and since only about 6% of adults have income protection insurance**, that belief is extremely widespread. The point is, you don’t need it until something completely unexpected happens. When it does, it’s too late. All insurance is about protecting yourself from unforeseen events and income protection is no different.





Myth No 6. Income protection policies don’t pay out


One of the most common misconceptions about insurance companies is that they’re happy to take your money and they’ll do all they can to avoid paying you when you make a claim. Income protection is part of an industry that’s regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The aim of these bodies is to protect consumers from harm that results from bad conduct. Their priority is to ensure the best outcomes for the customers of insurance companies. You can judge their success from the statistics.  In 2021 the average rate of pay-outs from the biggest insurance providers was 91%, and Shepherds Friendly, the underwriters for Eleos, paid out at 95%.


As for the other 5%, the main reason for claims to be declined is customers failing to disclose vital information when they applied for cover, such as pre-existing medical conditions. 


Myth No 7. I’ve got Payment Protection Insurance (PPI) so why do I need Income Protection (IP)?


PPI is useful but it’s different to IP. A PPI policy insures specific repayments on loans, credit cards and other debt and is paid to the creditor in instalments, replacing your regular payments. Income protection pays your chosen benefit into your bank every month as cash when you can’t work, replacing your lost income so you can keep up with your outgoings.


Myth No 8. I can’t get IP if I’m self-employed


Wrong. In the UK there are about 4.5 million self-employed people out of a workforce of 33 million.. 37% of the customers of our underwriter, Shepherds Friendly, are self-employed. 


Myth No 9. I’ve got a medical condition so no one will insure my income


Insurance is based on the assessment of risk. That doesn’t mean that an existing health problem will disqualify you from buying a policy. When you apply, you’ll be asked whether you suffer any existing health conditions and the insurer will carry out what’s known as medical underwriting to come up with a policy and premium that reflects your circumstances. 


Myth No 10. Applying and claiming is too complicated


his may have been true in the past. Now that policies can be bought and claims made online, the process has become simpler and faster. At Eleos we’ve made the online experience our priority. You don’t even have to talk to anyone, unless you want to. It only takes minutes to apply and buy, from your mobile, tablet or laptop. Claiming is just as easy.


In summary


Income protection is frequently characterised as pointless, expensive and complicated. It’s easy to believe this if you hear only the myths and not the reality. The decision on whether you need income protection is entirely up to you. All we’d ask is that you make an informed decision based on facts and figures rather than misrepresentations.


Eleos is making income protection accessible and affordable for everyone.


Browse our other stories to find out more.

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Eleos Life Limited (FRN: 998550) is authorised and regulated by the Financial Conduct Authority. Eleos Life Limited is a company registered in England and Wales (Company Number 14010855), with its registered office at 71-75 Shelton Street, Covent Garden, London, United Kingdom, WC2H 9JQ.©Eleos Life Limited 2024