If you unexpectedly lost your income, what would happen? Would you still be able to make mortgage payments or provide for your family? Many families in the UK could not manage a financial shock, research suggests.
Unexpected obstacles are a common part of life. But a study from Zurich indicates some people are neglecting to take steps to protect themselves financially. From facing an unforeseen bill to losing income, being able to overcome a financial shock is important for long-term security.
Despite more than half (53%) of UK adults taking unplanned leave or experiencing unemployment at some point the research found:
- 24% have no savings to fall back on
- 92% don’t have Income Protection cover
Low financial resilience and uncertainty mean that over a third (34%) do not think they’d be able to manage a financial shock or loss of income on their own. In fact:
- One in eight (13%) would have to sell their home if they lost their income
- A quarter (26%) would have to sell possessions
- 14% would have to find a cheaper place to rent
Despite this, many aren’t or are unable to build up the financial resilience needed to provide a safety net. The implications should they lose their job or be unable to work due to illness or injury are obvious. However, even before a financial shock, a lack of financial resilience takes its toll:
- 84% have woken up at night worrying about money
- 19% wake up at least once a week; this rises to 50% among those who don’t consider themselves financially resilient
- Worrying that cash won’t last until next payday is the biggest concern (19%). This is followed by anxiety around debt (17%) and a worry that income won’t support them or their dependents in the long term (10%)
While the figures show the devastating impact a lack of income could have for many families, the truth is that we’re more likely to protect tangible assets. 17% of people pay insurance to protect their mobile phone; just 8% do the same to safeguard their income.
Rose St Louis, Head of Strategic Partnerships at Zurich, commented: “It’s concerning that so many people have experienced unexpected time out of work, yet have no safety net in place for this potentially happening again. Even more shocking is the number who would have to resort to selling their home, as this action could have a significant impact on the whole family.
“Lack of savings and planning the family finances is putting millions of adults at risk of not being financially resilient, but not taking action could make the situation far worse. Putting the ‘it won’t happen to me’ view to one side, it’s vital that people review their circumstance, to see what support exists to protect their finances and lifestyle.”
What is Income Protection?
Nobody wants to think about what would happen if they weren’t able to work. And most of us are guilty of thinking it will never happen to us. But the truth is thousands of people are affected by financial shocks every year.
Income Protection insurance is designed to provide you with cover if you can’t earn an income for the reasons that fall on the terms and choices you make when taking out cover. Most will provide you with cover if you’re ill or injured and unable to work as a result.
The insurance will replace part of your income; the exact level will depend on your personal policy. It will continue until you can start working against or, in some cases, until you retire. Usually, it will cover it long-term illnesses after a deferred period, giving you peace of mind that you’ll be able to pay for the essentials should something happen. Understanding what your sick pay from work will cover and for how long, means you can find a policy with a suitable deferred period.
The money you receive from Income Protection cover is not taxed.
Should you need to claim, Income Protection is paid in monthly instalments. You’ll also need to prove that you’ve lost income due to being ill or injured. Typically, this will include proof of your income and evidence of why you’re off work, such as a medical report.
With this in mind, Income Protection can be valuable to many people.
Does your workplace have a sick pay policy that you could live off? Or do you have savings you could fall back on for a significant amount of time? If not, Income Protection could provide you with financial security.
If you think you could benefit from Income Protection but are worried about the cost, it’s worth getting some quotes; you might be surprised at how affordable it is. The cost of insurance is related to a number of different factors, from your age to past medical conditions.
If you’re worried about your home and financial security should you lose your income, we’re here to help. We can help you find an Income Protection product that aligns with your needs, please contact us today to start the process.