It can pay to protect family income

Many have no funds for crisis

MORE than half of people say their savings would run out after just three months if they were unable to work – up from less than a third in 2014.

Yet fewer than 1% of working people in Britain have their income protected against long-term absence from work due to illness or injury.

Some 23% say they could only last a month before they ran out of cash to pay their bills and another 23% don’t have any savings they could rely on at all, according to research from Cirencester Friendly.

Those aged over 45 are increasingly feeling the pinch. In 2014, 39% of this age group said their savings would last over six months, compared to just 25% in 2016.

And with inflation rising to 2.9% things are only going to get tougher as prices for the basics continue to escalate.

Rebecca Young, head of marketing at Cirencester Friendly, says: “These findings paint a concerning picture of the finances of the population, with people’s savings today lasting dramatically less time than in 2014.

“People who are unable to work due to illness or injury get very little help from the Government. Employment and Support Allowance (ESA) is just over £70 each week – this has decreased by nearly £30 in the last two years.

“We can’t predict the future and there are always going to be external influences outside our control, but protecting income, family and the home should be a priority.

“It seems we are a nation which is financially underprepared and it is essential that we know options are available to protect against the unexpected and safeguard our finances.”

Protection insurance is optional and when finances are already stretched it is the type of financial product families will cut back on.

The payment protection insurance fiasco, where banks hijacked a crucial financial product and flogged it at extortionate rates to those who would never be able to make a claim, has put many folks off taking out cover.

And this is leaving huge numbers of people vulnerable if they hit hard times. If you had a money tree in your garden you would protect it, so you should think of your family breadwinner in the same way. It is vital during these tough times.

PROTECT YOUR FINANCES

When we are fit and healthy, and everything is going well, the last thing on our minds is coughing up cash in case we suddenly can’t work.

But think about how you and your family would cope if you suddenly had to stop work for months on end. You need to weigh up the cost versus the risk to your financial wellbeing.

If you work, ask what cover you get as part of your benefits package. Often jobs come with life insurance and cover for critical illnesses.

Speak to a financial adviser and work out if you need to take out any additional cover to top that up.

If you have children and one partner works while the other looks after the kids, the non-earner may still need cover. Think about how the family would cope if anything happened to the non-earner. The breadwinner may have to give up work or reduce their hours to spend more time caring for the children.

If you are single or younger and without children, you may not need life cover. But critical illness and income protection can be vital as these will help you to keep up with your regular bills should you fall ill or have an accident.

TYPES OF COVER Life Insurance – pays out a lump sum when you die

There are two types. Term Assurance covers a fixed period of time, say 10 or 20 years, and pays out if you die during the term. You can choose from a level term, which pays out a lump sum agreed when you take out the cover, or decreasing term where the amount covered reduces over the term of the policy. Whole of Life continues throughout your life and pays out when you die.

Income Protection – replaces part of your monthly income if you’re unable to work

A long-term policy will pay out until you retire, die or return to work. A short-term policy will pay out for a fixed period of time, usually between one and five years.

Premiums depend on age, the income level you select, medical history and how long you wait before a policy pays out.

Critical Illness – pays out a lump sum if you’re diagnosed with an eligible critical illness

Policies vary widely between insurance providers. Illnesses include some cancers, heart attack or loss of limbs. Pre-existing medical conditions are usually excluded.

Mortgage Protection Insurance - pays out a set sum for monthly mortgage repayments

If you cannot work due to accident, sickness or unemployment it covers mortgage costs for 12 or 24 months.

People who are unable to work due to illness or injury get very little help