Protection take-up in decline over past year, Scottish Widows claims
The proportion of consumers who regard protection products as essential purchases has declined over the past year, as has take-up of such products, research from Scottish Widows reveals.
The provider, which recently announced plans to re-enter the IFA protection market, said its latest annual protection report shows that 44% see protecting their family in the event of death as an essential and a further 29% regard it as a luxury. This compares to 53% who saw it as an essential and 34% who saw it as a luxury in 2011.
Similarly, 29% see protecting their family in the event of illness as an essential, down from 39% last year, and 37% see it as a luxury, down from 45%.
When it comes to protecting income, 23% regard this as essential and 39% see it as a luxury, down from 35% and 47% respectively last year.
By contrast, the proportion of people regarding things such as broadband access, short breaks and shopping trips as essentials rather than luxuries has increased over the past 12 months. For example, last year 19% of people regarded short breaks as essential and 75% as a luxury, whereas now 23% see them as essential and 67% a luxury.
The survey of 5,000 UK adults also shows that take-up of protection policies has fallen over the past year.
The proportion of people taking out life insurance fell from 44% to 38% between 2011 and 2012, while the proportion of people with income protection dropped from 7% to 5%, and for critical illness cover it fell from 12% to 11%.
The survey reveals a slight increase in the proportion of people who are saving, but despite this 60% say they would only survive for a period of up to six months if they experienced a change in financial circumstances.
Some 28% of people say they would use up their savings within a month if they lost their income, while in the event of losing a partner, 29% say they would need to rely on their savings to cope financially and 16% say they would turn to state benefits.
Richard Jones, director of protection and annuities at Scottish Widows, said: "While it is encouraging to see a gradual improvement in people's attitudes towards saving, the worry is that people are not protecting themselves in the event of unforeseen events.
“Many do not have the provisions in place to support their families for any substantial period and even after just a month could be left with no buffer.”
The research also reveals that buying a home remains the primary trigger for taking out protection cover - it was given as the main reason for one in three critical illness plans and 27% of income protection policies.
The biggest barrier to protection, especially when it comes to critical illness cover, is cost. Of those without a policy, 22% say that they cannot afford cover, and 15% consider it to be a waste of money.
Jones added: "We can see from the findings that for many, protecting their family is considered a luxury. We often find that people wait for a trigger, like buying a home, to get protected and instead will spend any disposable income left at the end of the month on more tangible items you can see and use immediately.
“However, we would firmly advise families put some shock absorbers in place to deal with the unexpected and avoid any hardship which could be caused as a result."