Marvin OnumonuOnly 14% of full-time UK workers have income protection (IP), according to research from Shepherds Friendly.
Cover was more common among 25 to 34-year-olds at 20%, and 18% for those aged 35 to 44.
For 18 to 24-year-olds this was 14%, dropping to 10% for ages 45-54, and just 7% for 55 to 64-year-olds.
Data also showed that most workers (70%) had heard of IP.
47% believed current or past lifestyle, physical or mental health would automatically stop them getting cover.
Respondents thought chronic conditions like diabetes or arthritis (40%), past medical issues (37%), undiagnosed health conditions (37%), drinking alcohol regularly (33%) and mental health conditions (30%) would all lead to declined applications.
While 69% thought it pays a salary if someone is sick or injured, 42% wrongly thought it pays out for redundancy.
13% believed it pays off a mortgage, 12% thought it pays a lump sum in case of death, and 12% thought it covers medical bills.
69% did not know the amount of statutory sick pay, and when told it is £118.75 per week for up to 28 weeks, 27% said it was less than expected.
45% said their employer pays more than the statutory minimum, 34% said theirs does not, and 21% did not know what they are entitled to.
Phil Nash, chief sales officer at Shepherds Friendly, said: “It’s well-known that Income Protection is underutilised, but it’s often assumed this is due to a lack of awareness.
“The results of this survey were therefore striking in revealing the level of misconceptions surrounding the product.
“It is concerning that so many workers are misinformed, not just about IP but also about the other financial safety nets available if they are unable to work, whether from the government or their employer.”
Association of British Insurers (ABI) figures showed 97% of income protection products are sold with advice.
Nash added: “It’s clear there’s a real opportunity here for advisers and intermediaries.
“If they can educate their clients on what Income Protection covers, as well as highlight the potential gaps in the other support available in the event of illness or injury, there’s a significant chance more workers will see its value.
“Increasing the take-up of IP would represent a huge step forward in improving the financial resilience of the UK’s workforce.”
Additionally, the research found transparency around cost and ease of access were the main reasons workers would speak to a financial adviser about IP.
24% said knowing it is free would persuade them, and 23% wanted a free consultation.
21% said nothing would persuade them, 14% wanted clear, jargon-free advice, 9% were influenced by a strong social media presence, and 9% looked at online reviews.
For those aged 18-34, social media and online reviews were more important, at 18% and 15%.
Only 5% of younger workers said nothing would persuade them to speak to an adviser, compared with the overall 21%.
38% overall said they would consider a mutual like Shepherds Friendly for income protection, rising to 60% for 18-24-year-olds and 56% for 25-34-year-olds.
