The Iress Financial Readiness Index found that people underestimated how insulated they would be against such circumstances, as 41% of Britons believed they had sufficient cover.
The report also revealed the low take-up of protection in the UK, as only 14% of respondents said they had income protection in place. Further, just a quarter of people had reviewed their policy in the last year and 14% had not reviewed this at all, suggesting their cover could be inadequate if their circumstances had since changed.
Advice helps with the take-up of protection, Iress found. Of those who did seek professional advice during the home buying process, 71% of people had critical illness cover, compared to 36% across all homeowners. Iress said this demonstrated the positive impact of adviser involvement.
When asked why they took out a protection policy, a mortgage or remortgage prompted the largest share of respondents, with 27% collectively citing this as a motivation.
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Closing the protection gap with understanding
Alistair Morgan, Iress’ CEO for the UK, said: “This research shows a clear disconnect between how protected people feel and the reality of their cover. That current gap represents millions of households who may be far more exposed to potentially life-changing events than they realise.
“Major life events such as buying a home, getting married, or starting a family are key milestones to consider protection cover. Far too many people are making these decisions without professional support. The data shows that adviser involvement significantly improves outcomes, helping ensure protection is in place when it’s needed most.
“Engaging with a financial adviser or seeking guidance through education and tools could make all the difference in helping people achieve true financial security.”
He added: “Closing the protection gap will require greater awareness, earlier engagement and more open conversations about financial resilience. We hope these findings encourage households to check their cover and seek advice where appropriate.”
Jennifer Rafferty, Iress’ managing director for UK sourcing, said: “The protection gap we’re seeing isn’t just about products, it’s about understanding. Too many people don’t recognise their vulnerabilities until it’s too late. As an industry, we must equip consumers and advisers with smarter tools and technology that make protection conversations clearer, more relevant and easier to act on.
“By combining data-led insights, such as those from the Iress Financial Readiness Index, with intuitive digital experiences, we can better educate consumers, support advisers and meaningfully narrow the protection gap.”
