A specialist income protection company has warned that customers may be incorrectly mixing the product up with the recently-maligned payment protection insurance.
Cirencester Friendly surveyed financial advisers and found more than three quarters said their customers confused the two products. The survey also showed 62 percent of advisers said better education about the differences would boost income protection sales.
The two products work in very different ways. Payment protection insurance is usually sold alongside a specific loan or credit facility. It's designed to cover the cost of repayments if the borrower becomes unable to work. Banks have set aside billions of pounds to pay compensation to settle misselling claims after widespread cases of customers either not realising they'd signed up to PPI or being sold the product despite it being highly unlikely to pay out in their personal circumstances.
Income protection is not linked to a loan. Instead the idea is that if illness or injury prevents the customer from being able to work, the policy pays out a fixed regular amount until they reach retirement age. It doesn't cover medical costs and only pays out if you were working at the time of the illness or injury.
