What is income protection?
According to the ABI (Association of British Insurers), income protection insurance is designed to cover the loss of income caused by illness or injury, offering to cover part of the policyholder’s salary as well as providing additional support to get employees back to work as soon as possible.
Many people remain sceptical about income protection insurance policies not paying out and some feel that making a claim on their policy can be like trying to get blood out of a stone.
In this article, we aim to clear things up by looking at the latest income protection statistics in the UK, helping you to see whether or not income protection is really worth it for you.
Do income protection providers pay out?
Contrary to popular belief, most claimants have been able to successfully claim on their income protection policy after an injury or illness that prevented them from working.
We know this as we've gathered information from the Association of British Insurers (ABI), who states; 'Protection payouts see insurers support record numbers'.
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UK insurance statistics
The ABI confirms that a sum of £5.34 billion was paid out in insurance protection claims, reaching more than 200,000 customers or families in need as of 2018.
This impressive figure equates to £14.5 million being paid out EVERY DAY last year, seeking to financially assist more than 550 individuals and their close family to better cope in often life-changing (if not career-threatening) situations on a day-to-day basis.
The ABI’s statistics are comprised of data gathered from 90% of the protection insurance market here in the UK, and presents information about individual policies such as life insurance, critical and terminal illness insurance, total permanent disability claims and, of course, the one we’re most concerned with here, income protection.
According to the ABI figures, UK income protection insurance policy providers received 25,843 claims from policyholders during 2018, of which said insurers settled 22,768 in total.
This reveals that 88.1% of claims were successfully paid-out to insured parties, while conversely, 3,075 claimants were declined, equating to 11.9%.
The ABI haven't provided reasons for why over 3,000 claims were rejected. However, the most common cause of unsuccessful claims is the failure to disclose correct information to the insurance provider when originally applying for the income protection insurance product.
It is highly important to be completely honest when applying for an insurance policy - no matter what type of cover that is.
Being truthful helps the insurance provider to find the perfect policy for you and give you the exact amount of cover you need, while any claims should not be declined.
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Income protection payouts - How much was paid out in 2018?
As a whole, the total value paid out in income protection insurance claims for 2018 was said to be £648,815, with the average claim paid as £22,058.45.
It is worth noting that individual income protection policies might pay out for a few months or, alternatively, consecutive years, thus the figure quoted above represents an average, comprising of all new and on-going claims during 2018.
For those wondering about previous statistics, one glance at the comparable 2017 results shows a similar pay-out scenario once more, with the relevant figures suggesting that 97.8% of all claims were paid out, compared to 2018's 97.6%.
Income protection pay-out success rates compared relatively favourably alongside those falling into the total permanent disability insurance category (70.2%). However, this is not quite so impressive when it comes to term life insurance (97.4%), which saw insurers stumping up in excess of £2.8 billion), and whole of life insurance with 99.98%, witnessing £577 million in policy settlements over the 12 month period in 2018.
Income protection insurers paid out less average claim amounts (£22,058) than other protection insurance products did, with total permanent disability (£77,271) and critical illness (£70,925) being chief among those which habitually paid out more to successful claimants in 2018.