Over 10 million people could have the wrong protection cover - 12 Jan 2009

42 per cent have not updated cover after a life changing event Over half never think about updating their protection polices Use the start of a new year to fix your finances.

Over ten million people in the UK could have unsuitable protection cover after failing to update their protection policies, according to research released today from Barclays Financial planning.1

Life-stage events such as changing jobs, buying a house, or having a child can render a protection policy, such as life insurance, income protection, or critical illness cover unsuitable. But 42 per cent of people with protection policies have had one or more life changing event happen to them since taking out or last updating their cover, meaning they could be under false impressions that they have adequate protection for themselves and their families. David Stuart, Director of Advice and Products at Barclays Financial planning said: "When you buy a protection policy this should not be the end of the matter. It is crucial that people think about updating any cover, or switching to different types of products if, for instance, they have a child, get married or buy a house.

“It's a worrying statistic that over 10 million people could have the wrong cover when they think they are protected. Perhaps part of the problem is that people aren't often fully aware of what need and what sum their protection products cover in the first place, especially when they buy without advice.”

Nearly 40 per cent of people that have taken out protection policies did so without receiving advice from a professional, and 13 per cent did not know whether they had taken advice at all. This is concerning when linked to the number of people who have no idea what their life should be insured for (20 per cent) and nearly half of people (48 per cent) do not know why they took out their protection cover, or did so just because they thought they should. Nearly three quarters of policy holders (73 per cent) do not know how much they are insured for or what they would receive if they needed to make a claim.

David Stuart continues: “Our research seems to show a big gap in peoples’ understanding of their cover, which could create a false sense of security for thinking they have taken care of protecting their family and finances, when the reality if they made a claim could be quite different.”

The lack of people taking advice when buying protection could come down to a matter of trust. Barclays Financial planning's research also found that 33 per cent of people prefer to take their financial advice from friends, family or their partner rather than speaking to a professional.

David Stuart concludes: “At the beginning of a new year people often take the time to look at their finances, which is a great opportunity to find out if your existing protection cover continues to be right for your changing needs. The cost of updating an existing policy can be minimal so people shouldn't automatically think that their premiums might shoot up. We urge people to seek professional advice, as having the wrong kind of protection can create a false sense of security that's often realised too late.”

Notes:
1 - Opinium Research carried out an online poll of 2001 British adults between 24th and 28th October 2008 on behalf of Barclays Financial planning.
Barclays Financial planning research shows that 53% of people have protection cover. Of that 53%, 42% have had specific life changes since taking out or last updating their cover. ONS UK adult population figures for 2008 = 48,315,000.
The number of people who have protection: 53% of 48,315,000 = 25,606,950 people.
The number of protection holders that have had life change events since taking out or last updating cover: 42% of 25,606,950 = 10,754,919 people.
Life change events = buying a house, changing jobs, having a child, getting married, getting divorced, buying a second home.