Many homeowners are confused about the financial support they will receive if they fall ill, suffer an injury or lose their job, research from LifeSearch and HomeOwners Alliance has discovered.
The biggest misunderstanding concerns redundancy. Most homeowners who hold an income protection policy (61%) wrongly believe the product would pay out if they were made redundant.
The survey also discovered that one in five (19%) homeowners think that income protection is unnecessary because the government will support them if they were unable to work due to illness or injury.
This rises to 22% among those with a mortgage almost doubles to 42% for those aged under 35.
One in six (16%) homeowners incorrectly believe that owning an income protection policy would prevent them from claiming statutory sick pay, which is only £500 a month.
More than one in five (21%) believe that they do not need for income protection if their employer provides occupational or enhanced sick pay – a view held by 34% of under-35s.
Enhanced sick pay is another option, but it is paid at an employer’s discretion, is limited in duration and does not move with you if you change jobs.
Reality check
Debbie Kennedy, chief executive of LifeSearch, said: “Too many homeowners think they’ve got a safety net in place, when in reality, they’re relying on assumptions that don’t hold up – whether that’s expecting support if they lose their job, or overestimating what sick pay will cover.
“What we see every day is that the gaps aren’t complicated – they’re about clarity.
“A good adviser helps people understand how everything fits together, from state support to workplace benefits and what happens if those change or disappear when they move jobs.
“No one should be finding out how limited that support really is at the point they need it.”
Paula Higgins, chief executive of HomeOwners Alliance, added that too many homeowners rely on assumptions about financial support that do not match reality.
“A mortgage is usually a household’s biggest monthly commitment, yet this research shows widespread confusion about what state support, employer sick pay and income protection actually cover.
“The most worrying finding is that nearly half of homeowners wrongly think income protection would pay out if they were made redundant.
“That misunderstanding could leave families badly exposed at the worst possible moment.
“Homeowners need clear, practical advice so they understand what protection they have, where the gaps are, and how they would keep paying the mortgage if illness or injury stopped them working.”