Seven in 10 (67%) workers do not have any form of income protection in place, according to research by National Friendly.
The report found that those aged 18 to 34 were most likely to take out accident only income protection than any other age group, with 51% having some form of cover in place, compared with 28% of those aged 35 to 54, and 14% for those over 55.
Younger people were found to have a greater understanding of accident-only protection, and were more likely to consider taking it out (43% compared with 30% and 11%).
Those without protection said they prioritise spending on other necessities (26%), had never thought about it (32%), or believed they would not be able to afford cover (29%).
Some 16% believed their employer would still pay most of their income if they were absent from work long-term.
Only 38% of advisers said they had recommended accident-only income protection to a client, with the remaining 62% being either unaware of the product, or only viewing it as an option in situations where full cover cannot be considered.
Jo Miller, co-chair of the Income Protection Task Force (IPTF), said: “Starting by stating the obvious, full IP has to be the preference but as with short-term IP, I think AOIP also has its place in the market.
“I’ve had conversations with advisers who see it as a good option for certain types of clients (e.g. blue collar, manual workers) who resist the full option or cannot get full cover.
“For me, it’s about the presentation by the adviser – the full option should be presented first and adapted according to client response and in that sense, AOIP would have its place for some clients where budget or personal circumstances mean that something is better than nothing.
“Regular reviews by advisers would also give the chance to upgrade cover.”
Graham Singleton, CEO at National Friendly, said: “Being unable to work due to an accident can result in a loss of earnings that can have a serious impact on a person’s quality of life, particularly their financial wellbeing.
“While the findings of the research are worrying and highlight the many misconceptions surrounding AOIP and the IP sector as a whole, it is reassuring to see that 51% of 18-34 year olds already have cover in place, as these are the people with the majority of their working lives ahead of them.
“However, more needs to be done to encourage take up and understanding of AOIP among the wider workforce, particularly those aged 35 and over so they can continue to pay for essential day-to-day living costs and bills if they find themselves unable to work due to an accident.
“This will be a core focus for our business moving into 2024.”
