The Gender Insurance Gap

A recent report by The Exeter discovered that only 11% of women either have, or are applying for income protection cover in 2023. Men are also under-insured in this area, with around 16% holding or applying for an income protection policy. But with an uptake rate which is almost 50% higher for men, this points to a significant gender gap in insurance.

Why is There a Gender Insurance Gap?

In 2023, our legal and financial systems are mostly geared towards gender equality. Discriminatory practices around employment, pay, and financial services (such as gender-based insurance rates) are no longer acceptable. But nonetheless, there are still fewer women in senior roles than men, and women, on average, are still paid less.

While theoretically, the barriers to women accessing insurance have been removed, the reality does not reflect this.

Some of the reasons why women may be under-insured include:

• Financial concerns. The same study indicated that women were more concerned than men about the cost-of-living crisis, to the extent that it affected their mental health.
• The pay gap. UK women, on average, earn around 8.3% less than men. Additionally, women are still more likely to take time out of employment to raise a family or care for others.
• Whether or not they are in employment, women are usually more likely to provide informal care to others and on average, have significantly less leisure time in a week than men. Thinking about insurance needs can sit fairly low on the priority list.
• Taking this into account, women are usually less likely to be the main breadwinner in the family. In this situation, it may be a higher priority to insure the person who earns the most. Similarly, employees in senior roles are more likely to have insurance included in their remuneration package.
• Women are usually more likely than men to suffer from chronic health problems. This can make it difficult or off-putting to apply for insurance.
• Women are generally less engaged with financial services and experience worse outcomes from a financial planning perspective. They also tend to save less and have lower pension pots than men. Many women may not feel confident buying insurance or approaching an adviser.

Of course, many of these barriers can also apply to men, as indicated by the general trend of under-insurance. Other factors, such as general procrastination, apathy towards financial services, and a flawed assessment of the risks are not gender biased. But the combination of factors and broader patterns indicate that more needs to be done to make insurance accessible to women.

What Types of Insurance Should You Have and Why?

The main types of financial protection you should have are outlined below:

• Mortgage protection – to make sure your mortgage is cleared in the event of death.
• Family protection – additional life cover to provide your family with financial security. This could cover education costs, loss of income, or the cost of additional help at home.
• Critical illness cover – to provide a lump sum if you are diagnosed with a serious illness. This could provide a financial cushion if you are temporarily unable to work, or to make your life easier if you have longer-term symptoms (for example, by funding modifications to make your home more accessible).
• Income protection – to pay out a regular income if you are unable to work for a longer period. This is often a lower priority for families, but if you consider the likelihood of chronic conditions (such as back pain or mental illness) versus early death or a serious accident, a successful claim is far more likely.

Even if you aren’t the primary earner in the household, think about the financial consequences if anything were to happen to you. Unpaid labour can often be forgotten about, but the cost of additional childcare or paid help at home can quickly add up.

Tips for Buying Insurance

If you are looking to set up insurance, the following tips could help:

• Firstly, check for any cover available through your employer, or if they would be prepared to offer this. Even if you pay the premiums, this can often be cheaper, and in some cases, more tax-efficient, than setting up a personal policy.
• Check the terms of any existing policies. You might be able to get a better deal elsewhere, but if you took out your cover at a young age, the premium might be difficult to beat. Similarly, older critical illness policies can sometimes be more comprehensive as medical advances mean that newer plans no longer consider certain conditions ‘critical.’
• Think carefully about how much cover you need and your budget. If you are a higher earner with a young family and a large mortgage, your insurance needs will be significantly greater than someone with fewer obligations.
• Remember, your circumstances and requirements will change over time. It’s a good idea to review your insurance needs at least every few years, or whenever you reach a milestone or lifestyle change. Some policies will allow you to increase your cover, for example on marriage, the birth of a child, or a promotion.
• Shop around for the best deal, but make sure the policy is comprehensive enough and covers what you need. Don’t be swayed by free gifts or discounts, as they are built into the overall cost.
• Be honest and accurate about any health conditions or lifestyle factors. Leaving out key information could not only lead to your insurer denying a claim, but also invalidating your entire policy, even if you claim for unrelated reasons.
• Consider placing life cover in trust to simplify the claims process and avoid increasing the value of your estate for Inheritance Tax purposes.

A financial adviser can help you navigate the options and set up the cover that is right for you.

Please don’t hesitate to contact a member of the team if you would like to discuss financial protection.