The misconceptions around protection

misconceptions of protection

There are so many misconceptions around protection. In general, public opinion on the insurance industry is often negative, despite the positive safeguarding benefits for families. Protection is always a sensitive topic, resulting in conversations people would prefer to put off. We look at the disconnect between the insurance industry and people’s perceptions.

1 in 5 people believe insurers will do anything to avoid paying a claim Association of Mortgage Intermediaries (AMI)

In the press, we sometimes see horror stories of how a customer has been left in a situation where their insurance hasn’t paid out. But it’s important to understand these are likely to be exceptional circumstances. Negative media coverage often skews the facts and only adds to the continuing mistrust of the insurance industry. In reality, it’s essential you have the right cover in place to protect your income and family should the worst happen.

There might be certain factors that have resulted in a policy not being paid out for a particular incident. The thousands of happy customers who receive pay outs for their claims do not get this level of press coverage. Why? Because bad news stories sell newspapers.

Will my insurer pay my claim?

In most cases, yes – if the policy has been setup correctly and nothing has changed, insurers will pay out in accordance with the policy terms. Legal and General, for example, paid out 97% of their protection claims in 2021. They reported that most of the claims they couldn’t pay out were due to “deliberate or reckless misrepresentation”.

It’s important to make sure your insurance policies reflect your real circumstances. When you buy any type of policy, most providers allow a cooling off-period, which is usually around 14 days. During this time, carefully check the policy’s terms and conditions. You should also check your protection on an annual basis in case your circumstances have changed. You can then rest assured that you have the right level of cover in place.

Do insurers listen to customers?

Again, you might be surprised to learn that the answer is yes! Insurers are continually adapting their processes and claims procedures to improve the customer experience. Providers also regularly review their products to ensure they have a wide range of relevant policies on offer. Despite the level of negativity around the insurance industry, professionals within this sector are working hard to disprove common misconceptions.

One improvement made by some insurers like Legal & General is the “Check your Details” (CYD) post-application service. This gives you time to review your information before a formal policy application is made. This can be useful if there are sensitive details people would prefer not to disclose when they are talking to an insurance salesperson.

The Association of British Insurers (ABI) has also been working hard to improve the perception of the industry. They have designed a useful tool called ‘Percy, the Protection Calculator’. This enables customers to see an accurate estimate of their monthly income, based on their entitled payments if they were to lose their job. You can then check whether your entitlements will be enough to support your everyday living costs.

When should I review my insurance?

You should review your protection when a big life event occurs to ensure you still have an appropriate level of cover in place.

Below is a list of different scenarios where you should check your insurance policies:

  • When you move house or if you have paid off your mortgage.
  • After getting married, divorced or if you’re cohabiting.
  • When you have children or if they have left home.
  • If you have started a business or a new job.
  • If your aging parents have moved in with you.
  • When a close family member dies.
  • If you’ve bought a high-value possession.

The above factors could affect your insurance policies and leave you with an inappropriate level of cover, especially a life policy. Buying an expensive gift for your partner, for example, might need adding as an extra item to your Home Contents insurance. A change in job or starting a business venture will need to be factored into an Income Protection policy.

Overall, the insurance industry is working hard to improve its image. Every time you experience a big life event, check whether your existing insurance policies will still give you an effective level of cover. It’s also worth diarising an annual review, or book in with a professional financial planner who will check whether your policies are still right for you.

For more information on the benefits of protection, please read our previous blog, Protection: The value of buying peace of mind.

When did you last check your protection? For a review of your existing life cover critical illness policies, get in touch to speak to our financial planning team.