Income-based protection products are more suitable for the vast majority of consumers than lump-sum products, according to protection IFA LifeSearch.
It says that although over 95 per cent of all protection products bought are lump-sum-based, nearly all consumers would find better value in an income-based product such as income protection or family income benefit.
LifeSearch's fourth protection report says consumers feel more comfortable buying lump sum life cover as they have heard of it. The report points out that family income benefit is cheaper than lump sum life cover and provides cover for consumers when they really need it.
The report also predicts that the guaranteed rate market will survive for the next few years and says that with new providers entering the market, consumer choice is starting to widen.
It reveals that new types of product are being developed to bridge the gap between critical-illness cover and income protection as the number of new policies being taken is beginning to fall.
Senior technical adviser Kevin Carr says: “Well over 95 per cent of all products bought in the protection market are lump-sum-based but there is a flaw here as a lump sum does not last very long once it has been invested. If you use it to clear your debts, then what is left?
“An income-based product is much better value but is sold by very few mortgage companies as it is too complex. We believe they should start selling it.”