Only a small minority of UK homeowners correctly understand what income protection (IP) covers, according to research from LifeSearch and HomeOwners Alliance.
The survey of 2,000 UK adults found more than a quarter (26%) of homeowners wrongly believed income protection did not cover conditions such as anxiety or depression.
Among those who already held a policy, this rose to one in three (34%), and to 37% among under-35s.
Only a quarter of homeowners correctly understood that mental health was covered. Nearly half (48%) said they did not know.
The research also found one in six homeowners (16%) believed the self-employed could not access income protection, rising sharply among younger groups (31% of under-35s) and those that already held cover (28%).
A further 38% did not know whether this was true.
According to the research, nearly one in five (18%) homeowners believed only the main earner needs income protection, with uncertainty particularly high among younger households (30% of under 35s) and those with children (26%).
One in four (26%) people who held an IP policy also agreed that it was something that only the main earner of the home needed.
More than a third (36%) of homeowners believed income protection only paid out for permanent or very serious conditions.
This increased to nearly half (49%) of under-35s and to 45% of existing policyholders. A further 36% of homeowners did not know what conditions were covered.
A fifth (22%) of homeowners believed they could only claim once on an IP policy – rising to 26% of those with a policy and 36% of under 35s – while most policies allow multiple claims in reality.
Perception gap and misconceptions
Debbie Kennedy, CEO of LifeSearch, (pictured) said: “Income protection can provide a valuable safety net to so many people, yet this research shows there’s still a real gap between how people think it works and what it actually provides.
“We see this play out in real conversations every day. These misconceptions reflect an industry that has historically done a better job of selling protection than explaining it.
“If we want customers to value their cover, renew it, and tell others about it, then clearer communication, better ongoing engagement and stronger product understanding need to become the norm – not the exception.”
Paula Higgins, CEO of Homeowners Alliance, said: “These findings reveal a clear gap between perception and reality when it comes to income protection.
“Many homeowners wrongly believe it won’t cover mental health, isn’t available to the self-employed, or only pays out for serious conditions – leaving them more financially exposed than they realise.
“At a time when more people are self-employed and households depend on two incomes, these misconceptions matter. Income protection can provide vital support if illness or injury stops you working, yet too many people either misunderstand it or overlook it entirely.
“There’s a real need to improve awareness so people understand what cover is available before it’s too late.”