Downton Abbey viewers may have been angered by the sheer number of adverts wedged into the programme, but that doesn't mean they were all worth ignoring...
Have you been following the plight of Gary Smith? 10 million Brits have. That’s if they didn’t switch off or nip to toilet during Downton Abbey’s numerous advert breaks.
Yes, Aviva’s latest advertising campaign – airing every Sunday night during ITV’s popular period drama – has caused something of a stir. The ads tell the true story of Gary Smith, who had a motorcycle accident in 2002 that prevented him from continuing his job as an engineer. Luckily Gary had taken out an insurance policy that paid him an income if he was unable to work.
OFCOM received a handful of complaints about the ad. Strange when you consider that the type of insurance it advertises – income protection– is a widely ignored but highly important policy...
Least sold, most important
Income protection is a form of insurance that will pay you a regular income if you are unable to work due to illness or disability. You can also add on cover to protect against general unemployment.
According to Matt Morris of protection advisers Lifesearch, income protection insurance should be the first port of call for anyone looking for life cover. It’s the “one of the least sold, but most important”, he says.
After all, to put it bluntly; if you're a middle-aged person, the chances of you getting ill and being unable to work are far higher than the chances of you dying.
In practice, income protection works much like any other insurance policy. Premiums are payable every month according to the level of protection you take out. And if you are taken ill or disabled and are unable to carry on working, your policy pays out a monthly tax-free income; usually around half of your original salary. This replacement income could prove an essential lifeline, especially if you have dependents and a mortgage.
Better than PPI
Income protection has been somewhat overwhelmed in recent years by the similar form of cover; payment protection insurance (PPI). PPI is usually sold alongside credit cards, loans and mortgages and will repay debt if your income dries up.
It’s been in the news recently after banks were found to be mis-selling it by the bucket-load back in the boom years. And as if fraudulent mis-selling wasn’t enough, this form is cover is actually inferior to income protection.
PPI generally only lasts for one or two years, income protection can last for the short term or long term. For example, most policies will last until your retirement date or until you are fit enough to return to work. If you do get back to work – but on a lower wage – most income protection plans will also supplement your income.
Moreover, the number of exclusions in most income protection policies is far fewer than in PPI. Income protection will cover you for musculoskeletal and mental health issues (including stress) – the two most common reasons for being off work; PPI will not. This difference plays itself out in the successful claim rates of the two types of cover: income protection is around 90%, while PPI is just 50%.
Tips and traps
Here are a few more essential tips and traps to watch out for when buying income protection:
- Always opt for own occupation cover. This will pay out if you are unable to perform your own job. The alternative, any occupation cover – often used in PPI policies – will only pay out if you are unable to do any job.
- Think hard about the specified delay time between signing off work and receiving your insurance income. This will be written into your policy and you’ll have to live off savings and sick pay throughout it.
- If you are in poor health and have exclusions written into your policy, check to see if your provider will issue you a discounted premium.
- Don’t be put off income protection if you’re not in official employment. If you’re a home-maker for example, you’ll still form a huge financial part of any household. And if you were to be taken ill, chances are you’d have to hire in nannies or cleaners to look after the home.
Will Gary make a difference?
Gary Smith’s Aviva income protection ad may have not gone down too well the viewers of Downton Abbey, but its message is still important.
Recent stats – also from Aviva – show that 90% of homes have no income protection cover. Moreover, 60% have no life insurance – protection that pays out when a policy holder dies – and 85% hold no critical illness cover.
These figures show a nation dangerously uninsured. Who would pay your mortgage if you were unable to work? Or foot the energy bill? Or clear the credit card? If you depend on your salary – as most do – and have dependents, some form of life income cover is essential. State benefits simply will not cover the rapidly rising cost of living in this country.
This is why – despite the backlash against it – we should all hope that Gary Smith’s story does make a difference.
What do you think?
Have you had any experiences with income protection? What’s your opinion on the cover?
Have your say using the comment box below.
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