Planning & protection
Gary Goodwin
For many people, financial protection is something they think about when buying a home, starting a family or taking on a large financial commitment.
But for others, protection can remain low down the list of priorities until something happens that makes the need for it suddenly obvious.
New research from the Financial Conduct Authority (FCA) highlights just how large this gap can be.
Its Pure Protection Market Study, published in September 2026, found that 58% of UK adults do not hold any pure protection product. Of those without cover, 59% had never considered their protection needs.
The FCA’s research also found that people who do not have protection often have understandable reasons for not buying it. Cost, other financial priorities and a belief that protection is unnecessary all feature prominently.
So what types of financial protection are available, what could happen if you do not have appropriate cover, and how can a mortgage or financial adviser help you decide what may be suitable?
The FCA’s consumer research provides some revealing answers.
Among people who did not hold any pure protection but had considered their protection needs, the most common reasons for not having cover were:
These findings suggest that the protection gap is not simply about people choosing not to insure themselves.
For some, the problem is affordability.
For others, it is a lack of understanding about what protection does, uncertainty about which policy they need, or simply not having considered the issue.
The FCA has identified particular groups that are disproportionately unprotected, including renters, self-employed and gig-economy workers, people on lower incomes and people with pre-existing medical conditions.
Financial planning often concentrates on what people want to achieve: buying a home, saving for retirement, investing or building up savings.
Protection deals with what could go wrong.
That can make it psychologically easier to put off. Yet a family’s ability to achieve its financial goals can depend heavily on what happens if an income disappears because of death or illness.
For example, someone might have spent years building a pension or saving for a deposit, but still have relatively little financial resilience if they were unable to work for a prolonged period.
There is no single protection policy that covers every financial risk. Different products are designed to respond to different circumstances.
Life insurance is designed to provide a payment if the policyholder dies during the period covered by the policy.
For people with a mortgage, partner or children who depend on their income, life insurance can help provide financial support following their death.
There are several types of life cover. Level-term insurance provides a fixed amount of cover over an agreed period, while decreasing-term insurance can be used to cover a liability such as a repayment mortgage as the outstanding debt reduces.
Some policies provide increasing cover, which is designed to help maintain the real value of the benefit over time.
There is also whole-of-life insurance, which is designed to pay out whenever the policyholder dies, provided the policy remains in force. It is generally more expensive than term insurance and can be used for specific estate and inheritance-tax planning objectives.
Critical illness insurance can pay a lump sum if the policyholder is diagnosed with one of the specified illnesses or medical conditions covered by the policy.
The precise conditions and definitions vary between policies, so it is important not to assume that every serious illness will automatically result in a payment.
A lump sum could potentially be used to reduce a mortgage, cover household expenses, pay for adaptations to a home or provide financial breathing space while someone recovers.
For many households, their biggest financial asset is not their house or pension – it is their future earning potential.
Income protection is designed to provide a regular income if illness or injury prevents someone from working. Policies typically cover around 50% to 65% of income, subject to the policy’s terms and limits.
Income protection can be particularly relevant to people who would struggle to meet their mortgage, rent and other essential expenses if their salary stopped.
The length of the deferred period – the time before payments begin – can also affect the premium. Common deferred periods include four, 13, 26 and 52 weeks. Generally, a longer deferred period means a lower premium.
Depending on your circumstances, there may also be other forms of protection to consider, including family income benefit, relevant life cover for certain employees, business protection and protection available through an employer.
Private medical insurance is different from the pure protection products examined by the FCA’s market study, but may also form part of a broader approach to financial resilience.
The important point is that protection should be considered in the context of your circumstances rather than as a list of policies everyone should buy.
There is no guarantee that an insurance policy will be needed. But the financial consequences of an unexpected event can be significant.
Consider what might happen if you:
Without appropriate protection, a household may need to rely on savings, investments, family support, benefits or other assets to meet its financial commitments.
That could mean using money intended for another purpose, delaying retirement plans or selling investments or property at an inconvenient time.
The key question is what would happen financially if the unexpected occurred, and how much of that risk could you reasonably afford to insure?
One of the biggest barriers identified by the FCA is cost, with 19% of people who had considered their protection needs but had no cover saying it was too expensive.
However, there is no meaningful single “typical” cost for protection insurance.
Premiums can vary significantly according to factors including:
Government-backed financial guidance site MoneyHelper says life insurance providing a meaningful level of protection can cost from a few pence a day, but stresses that premiums depend on individual circumstances and the amount of cover required.
For income protection and critical illness cover, costs can vary particularly widely because insurers assess the risks and benefits differently.
This is why comparing the monthly premium alone can be misleading. A cheaper policy may provide less comprehensive cover, have different definitions or exclusions, or offer a different level of benefit.
The FCA’s market study found that competition generally works well for existing protection customers and that there is a wide range of products available.
It also found high claims acceptance rates, with 98% of protection claims accepted in 2024, according to the FCA’s analysis of ABI data.
It can be tempting to search for the cheapest protection policy and assume that is the best option.
But protection is designed to respond to a future event that could have significant financial consequences. Therefore, the details of the policy really matter.
Two policies might have similar premiums but different:
For income protection in particular, the definition of incapacity can make a substantial difference to when a policy pays out.
It is also important to provide accurate information when applying. Insurers may check medical information when a claim is made, and inaccurate or incomplete answers can affect whether a claim is paid.
For many people, buying a home is the point at which protection becomes particularly relevant.
A mortgage creates a long-term financial commitment, while a household may also rely on one or two incomes to cover the mortgage, bills and everyday spending.
A mortgage adviser can therefore help you consider protection alongside the mortgage rather than treating it as a completely separate issue.
An adviser can help identify policies from different providers and compare the features, definitions and costs.
This can be particularly useful where policies are difficult to compare directly.
The FCA’s research found that 4% of people who had considered protection but did not have cover said it was confusing and hard to compare, while another 5% lacked confidence that they would choose the right product.
The amount of cover required will depend on your circumstances.
An adviser can help consider factors such as:
This can help avoid both under-insuring and paying for cover that may not be necessary.
Protection does not exist in isolation.
A broader financial plan might need to consider how savings, pensions, investments, mortgages and insurance interact.
For example, someone with a large emergency fund may be able to cope with a shorter period away from work, while someone with limited savings might place greater importance on income protection.
Similarly, employer-provided death-in-service benefits may reduce the amount of additional life cover required – although such benefits can disappear if you leave the employer.
A mortgage adviser or financial adviser can therefore help you consider the balance between what you need to protect, what you already have and what you can afford to spend.
Protection needs can change as your circumstances change.
It may be worth reviewing your arrangements after events such as:
It is also worth reviewing whether existing policies still reflect your needs.
However, cancelling an existing policy before replacement cover is fully established can create a gap in protection. Your age or health may also mean that replacement cover is more expensive or provides different terms.
Consider what financial commitments you have, what income your household relies on, what savings and employer benefits you already have, and what would happen if you could no longer work or died unexpectedly.
You may decide that you need additional protection, that your existing cover is sufficient, or that other financial priorities should come first.
A mortgage or financial adviser can help you understand the options, compare policies and consider where protection fits within your wider financial plan.
Get in touch with an adviser today to find out more.
Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. Protection policies are subject to terms, conditions and exclusions. Whether a claim is paid will depend on the policy terms and individual circumstances. Always seek professional advice before making financial decisions.
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Financial protection is insurance designed to provide financial support if specified events occur, such as death, serious illness or an inability to work because of illness or injury. Common forms include life insurance, critical illness cover and income protection.
The main types include life insurance, critical illness cover and income protection. Other arrangements can include whole-of-life insurance, family income benefit and protection provided through an employer.
There is no legal requirement to have life insurance when taking out a mortgage. However, it can be important to consider how your mortgage and other household expenses would be covered if you died, particularly if someone else depends on your income.
Whether life insurance is appropriate depends on your circumstances. It can be particularly relevant if you have dependants, a mortgage or other financial commitments that could be difficult for your family to meet after your death.
Life insurance generally pays a benefit when the policyholder dies, subject to the policy terms. Critical illness cover pays a lump sum if the policyholder is diagnosed with one of the specified conditions covered by the policy.
Critical illness cover generally provides a lump sum following diagnosis of a specified condition. Income protection provides regular payments when you are unable to work because of illness or injury, subject to the policy’s definition of incapacity and other terms.
There is no standard price. Premiums depend on factors including age, occupation, health, smoking status, the amount of income covered, the deferred period and the policy’s terms.
This depends on factors such as your mortgage and other debts, household income, living costs, number of dependants, existing savings and other protection arrangements. A useful starting point is to consider what your family would need financially if your income disappeared.
Having a medical condition does not necessarily mean you cannot obtain protection. Depending on the circumstances, an insurer may offer cover at a higher premium, with exclusions or on different terms. Specialist providers may also be available.
The cost varies considerably. Life insurance can cost from a few pence a day according to MoneyHelper, but premiums for all forms of protection depend on individual circumstances and the level and type of cover required.
A mortgage adviser can help you consider protection alongside your mortgage and compare available policies. They can also help you think about how your mortgage, income, dependants, existing savings and employer benefits affect your protection needs.
It can be sensible to review protection when your mortgage or wider financial circumstances change. A new mortgage may alter the amount of debt you need to protect, while changes in income, family circumstances or employment benefits may also affect your wider protection needs.
Not necessarily, but it is worth considering how long your savings would last if you could not work or whether they would be sufficient to support your dependants after your death. Savings and insurance can play different roles in a financial plan.
You would generally need to rely on other resources if an event covered by protection insurance occurred. Depending on your circumstances, this could mean using savings or investments, relying on a partner’s income, reducing spending, selling assets or potentially struggling to meet financial commitments such as mortgage or rent payments.
Not necessarily. The level of cover, policy definitions, exclusions, claim conditions and other features can be just as important as the premium. Comparing policies on price alone may not show which policy is most appropriate for your circumstances.
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