Over two thirds of people would struggle financially if they were unable to work due to ill-health

As we enter Income Protection Awareness Week, new Aviva research¹ highlights the ongoing need to heighten awareness of income protection and the opportunity that advisers have to help close the protection gap amongst the younger generations.

Over two thirds (67%) of UK adults surveyed said that they’d struggle financially if they were unable to work.

Despite this, over seven in ten (71%) UK adults said that they have never investigated getting an income protection product. Of these, around one in five (19%) said they’d never heard of the product. This rises to a quarter (25%) among the Gen Z demographic.

Just under half (47%) of people said that they’d rely on their savings to cover their living costs if they were unable to work due to long-term sickness. Slightly fewer (44%) would cut back on non-essential expenditure and a third would control their spending by shopping for lower-cost brands.

Around two in five (40%) would look to find money from elsewhere – either by borrowing from friends or family (17%), relying on someone else to pay the cost (17%) or by taking out a bank loan (6%). Just under a third (32%) say they’d rely on state benefits.

Barriers and triggers to purchase

Aviva’s research reconfirmed two known barriers to buying income protection – perceived cost and lack of awareness. Over a quarter (26%) of people said that they didn’t think that they could afford the product. A similar number (23%) said that they didn’t think they needed it.

Reassuringly, over a quarter (27%) said that they may investigate income protection in the future.

Fewer than a third of people said that they would never consider taking out income protection. (32%)

Unsurprisingly, buying a house (36%) topped the list of key life events when individuals would consider buying income protection.

However, fewer than one in ten (9%) people said that they’d consider taking out income protection when they moved into a rental property. This highlights the opportunity to raise awareness of the importance of having financial protection for your housing costs– whether you own your home or not.

Interestingly, more than half (55%) of Gen Zs, who make up a high proportion of renters, said that they may consider taking out income protection when they get older.

Income protection the ‘most appealing’ protection product for Gen Zs

A separate Aviva study earlier this year² found that of all the protection products, Income Protection was most appealing to the younger generations. Almost a third of Gen Zs taking part in the study said that they would actively consider Income Protection, with three quarters showing some interest.

Three in four Gen Zs who have not currently got income protection said that they were interested in hearing more about it, and the research showed that the barriers to entry for Gen Zs are more around education and awareness than rejection or distrust.²

Although Gen Zs are known for being digital natives, Aviva’s research also highlighted the importance of human intervention to aid understanding and build trust, showing the essential role that advisers can play in helping to raise awareness of income protection amongst this audience.

Daren Boys, Protection Portfolio Distribution Director at Aviva said:

“Our research confirms that most people recognise that they’d struggle financially if they were unable to work due to ill-health, however, there’s still a heavy reliance on savings or family members to cover their living costs.

“Income protection provides a much-needed safety net. However, Aviva’s research confirms that lack of awareness continues to be a key barrier to income protection sales. Although people are more likely to consider income protection when they buy a house, very few people would think about taking out an income protection policy when they move into a rental property.

“There’s a real opportunity for advisers to help explain the benefits of income protection for those who are renting. This can open the door to starting conversations about income protection with the younger generations now, rather than needing to wait until individuals reach traditional milestones like buying a house.”

Advisers can find useful information to help them support clients that are renting on Aviva’s Tenant protection hub or contact their local Protection BDM.

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References

¹The research was conducted by Censuswide with 1,002 UK employees of working age (16-65) - (full time OR part time) who do not currently hold a personal income protection policy (minimum of 250 Gen Z respondents aged 16-27 years) between 09.09.2024 - 13.09.2024. Censuswide abide by and employ members of the Market Research Society which is based on the ESOMAR principles and are members of The British Polling Council.

²Aviva’s GEN Z Insight Research, January 2024

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