Younger workers are buying insurance to protect their incomes in the coronavirus outbreak, but will they be covered if they can’t work?
- Comparison site sees 400% rise in income protection searches by under-25s
- Young people are looking to protect their finances in the wake of coronavirus
- However, most income protection policies will not protect against the disease
- Here’s how to help people impacted by Covid-19
Young people are increasingly taking out income protection policies in the wake of coronavirus but the majority may not actually be covered for the disease.
Startling new figures from comparison site Active Quote have revealed a 400 per cent rise in the number of under-25s looking to take out income protection insurance in March when compared to last year.
Enquiries from customers aged 20 and under also rose five-fold in over the same period.
However, there is a risk that many of these new policyholders are taking out insurance that doesn’t actually protect their finances if they are unable to work due to coronavirus.
Enquiries from customers aged 20 and under also rose five-fold in over the same period
Traditionally, critical illness cover and income protection insurance protect your finances if you are unable to work due to illness or redundancy.
There are four main types of income protection – mortgage, redundancy, loan and accident and sickness cover – which are available as individual policies or as a package.
But new policies are unlikely to cover coronavirus. Insurers started to add exclusions as the pandemic developed which means no payouts for those off sick with the virus.
This means if you’re taking out insurance specifically to protect against coronavirus and you buy the wrong cover you will be paying for something you don’t need and may still be left financially vulnerable if you are unable to work for that reason.
On top of this, many insurers pulled their accident sickness and unemployment insurance products in the wake of the coronavirus outbreak, so options may be limited.
The Association of British Insurers has warned the majority of policies won’t pay out to those self-isolating.
What are the different types of protection insurance and will they pay out?
When purchasing protection cover, most people tend to take out life insurance, critical illness cover and income protection.
When it comes to income protection, existing policyholders will need to check with their provider to see if they will be covered in the event that they cannot work to due falling ill with the coronavirus.
However the majority of policies won’t pay out to those self-isolating.
For example, if a member of your household is unwell and you follow the Government’s advice by self-isolating, your policy won’t cover you.
Critical illness cover offers a payout on the diagnosis of a particular illness. If you have a critical illness policy, it’s unlikely to cover coronavirus. Again, check your policy wording or ask your insurer if you need clarification.
Life insurance pays out when you die. There are a few different types – level term insurance, which offers a set payout for a set period of time, decreasing term insurance, which covers you with a declining sum for a set period of time, and whole of life cover, which pays out a set sum whenever you die.
Life insurance won’t pay out automatically – a claim has to be made by the policyholder’s dependents once they pass away. However, the insurer should pay out in the unfortunate event of a coronavirus death.