Misunderstandings around eligibility and cover are a major barrier to income protection take-up among UK workers, new research suggests.
Shepherds Friendly’s latest survey shows that just 14% of full-time workers hold income protection, despite 70% being aware of the product.
Uptake is highest among 25 to 34-year-olds (20%) before falling sharply with age, dropping to just 7% among 55 to 64-year-olds.
The research indicates that lack of awareness is not the issue. Nearly half (47%) of respondents believe lifestyle, or past physical or mental-health issues, would automatically lead to an income protection application being declined.
This misconception is highest among 35 to 54-year-olds at 51%.
Chronic conditions were cited as a likely barrier by 40% of workers, and 37% believed past medical issues such as surgery or hospitalisation would rule them out.
Almost a third (30%) said they believed having a mental-health condition would lead to automatic rejection, while 33% cited regular alcohol consumption.
There is also confusion about what income protection actually covers. While 69% correctly said it pays out due to illness or injury, 42% mistakenly believe it covers redundancy.
Some 13% thought it pays off a mortgage, 12% believed it pays a lump sum on death, and 12% said it covers medical bills.
The survey also highlights knowledge gaps around existing safety nets. Some 69% of full-time workers did not know how much statutory sick pay is.
When told the current rate is £118.75 a week for up to 28 weeks, 27% said it was lower than expected.
A third (34%) reported their employer does not offer any sick pay beyond the statutory minimum, and a further 21% did not know whether it did.
Phil Nash, chief sales officer at Shepherds Friendly, said: “It is often assumed low income protection uptake is down to lack of awareness. The research suggests misinformation is a significant barrier to take-up, both around eligibility and what income protection actually covers.
“Combined with limited understanding of employer or state provision, many workers are unlikely to be adequately protected.”
According to ABI data, 97% of income protection policies are sold with advice, highlighting the adviser role in addressing misconceptions.
Nash said advisers are well positioned to demonstrate the product’s relevance within broader financial resilience planning, particularly under the Consumer Duty.
“If advisers can clearly show how income protection fits into a client’s protection strategy and highlight gaps in state or employer support, there is a significant opportunity to increase engagement,” he said.
Cost transparency and ease of access emerged as the strongest drivers for advice engagement.
Some 24% of respondents said they would speak to an adviser if they knew there was no broker fee, and 23% said a free consultation would prompt them. Another 21% said nothing would persuade them to seek advice.
Clear, jargon-free communication was a motivator for 14%, while younger workers showed greater interest in adviser social-media presence (18% of 18 to 34-year-olds, versus 9% overall).
Younger workers were also more open to mutual providers. While 38% of all respondents said they would consider a mutual for income protection, this rose to 60% among 18- to 24-year-olds and 56% among 25- to 34-year-olds.
