British Families Under Informed And Under Insured

Most British families face a sharp reduction in their standard of living if they are affected by serious illness or death, according to new research¹ published today by Scottish Provident, the leading health and life insurance specialist.

The survey of adults aged 16 and over, conducted by MORI Financial Services, shows that 56% of people have no insurance cover at all that will help secure their financial position if the worst should happen.

Few people have adequate cover and this is often due to misconceptions about the risks and lack of understanding of the options.

Inadequate cover

• Only two in five (37 per cent) consumers have cover which will pay a lump sum if they die
• Just over one in seven people (13 per cent) have cover which will provide a sum if they are diagnosed with a critical illness and a similar number (11 per cent) have cover which will help replace their income if they are off work for an extended period due to disability

Poorly informed

• Four in ten (40 per cent) believe that the state will provide for them and their family financially if they are unable to work for six months or more. In fact the State benefit is only 16350.90 per week if you are ill for up to 28 weeks increasing to 16367.50 if you are out of work for a year².
• Just over one quarter (26 per cent) believe their employer will bail them out if they are unable to work for over six months. In reality, most employers would support them for only six months³
• Many people believe there is little chance of contracting a serious illness preventing them from working for over six months. One in four (25 per cent) think that the likelihood is 1 in 100 while less than one in ten (8 per cent) selected the correct odds at 1 in 16⁴.
• Almost one in three (28 per cent) believe that critical illness and disability cover is too expensive.

John Hay, head of product marketing for Scottish Provident comments:

"We have seen good growth in the number of people taking out life and health insurance cover in recent years but this research shows that we have to work even harder at getting the message across. Too many people have false optimism - either thinking 'it won't happen to me' or that the State and their employer will look after them."

"The idea that critical illness and disability cover are only for the wealthy seems to be too widely held. Young parents aged thirty would only pay around 16334.69⁵ a month for cover that would pay a lump sum of 163100,000 if either was diagnosed with a critical illness. Compared with the cost of insuring a typical car, it doesn't seem a lot to pay for peace of mind."

Lack of advice

Almost four in ten (39 per cent) of the people with cover bought it direct from an insurance company whereas only one in four (25 per cent) benefited from the expertise of an independent financial adviser.

John Hay says:

"Getting good advice can be as important when buying life cover as it is when planning investments and pensions. People too often just look at the price which can mean they end up with not enough cover or else don't have the right cover. Taking time to consult an Independent Financial Adviser gives you the benefit of their wide expertise and can mean you get more suitable cover as well as better value for money."

1. MORI Financial Services conducted 2,063 interviews among a representative sample of adults' aged 16+ across GB between 29 June - 4 July 2000.
2. Source: benefits agency rates from April 2000
3. Source: The Facts of Life and Health Insurance 1999
4. Source: Annual Abstract of Statistics
5. Source: Scottish Provident based on Male and Female age 30 next birthday, non-smokers, 163100,000 paid on critical illness only with a term of 25 years.