A report from insurance firm The Exeter suggests that this equates to around 10 million workers miscalculating the amount of Government support they would receive if they are ill.
Only 27% of UK workers know the amount of support they would receive and around 8% believe they will receive over double the actual amount.
Around 18% do not know if they are entitled to receive employer sick pay at all and in the private sector 13% of UK workers are not aware of their sick pay entitlements.
Nearly 19% are not entitled to sick pay at all and almost half would only receive support for up to three months.
Cost of security
On average, UK workers estimate that the monthly cost of an income protection policy was £35.20, which is higher than the actual average of £24 for a two-year limited benefit term.
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Only 6% of all UK workers surveyed said that income protection was unimportant, the lender said that many more working Britons may buy a policy if the misconceptions about the cost of cover can be negated.
Jamie Page, head of protection distribution at The Exeter, said: “It’s worrying that so many workers either overestimate the value of Statutory Sick Pay or are unsure whether they are entitled to it at all. In the event of a long-term illness, workers may find themselves dependent on a highly reduced income or without a financial safety net at all.
“This can create added stress and potential hardship for themselves and their families as they burn through their hard-earned savings – if they are fortunate enough to have money set aside.
He continued: “Although workers are not always clear on its cost, they do evidently recognise the value of income protection insurance. However, the first step in covering any gap in sick pay provision is knowing how much you currently would receive, and for how long.
“From there, a conversation with an independent financial adviser is always the best way to understand the wider options available to improve your financial security.”
Andrew Wibberley, co-chair at the Income Protection Task Force (IPTF) added: “This new research highlights the opportunity to start a conversation that helps a customer understand the reality of their current financial situation and how they can strengthen it.
“One suggestion from this year’s Income Protection Awareness Week, was not to scare potential customers by focusing on the level of benefits available to them, but rather give the good news that they do at least have something.”
He added: “By making customers aware of what’s available and how they could get to a level of income that they will likely need should they be unable to work due to illness or injury, we can have a positive conversation rather than simply highlighting a gap in their understanding or making them feel like the problem is too big to solve.”
