Lack of protection puts families at risk: report
Families are being left vulnerable to financial hardship as the number of people taking out protection products continues to decline, Scottish Widows has claimed.
Three out of four families have no protection in place, despite challenging economic conditions and government spending cuts, according to the fourth Scottish Widows Protection Report.
The report showed the take-up rate among households for life insurance, critical illness and income protection had fallen year-on-year. It indicated that families were also more financially vulnerable than in 2011, with more than half of respondents relying on one income.
Some 60 per cent said they would survive financially for up to six months should the household breadwinner become unemployed, while almost 30 per cent it would deplete their savings in one month.
Richard Jones, director of protection and annuities for Scottish Widows, said: “It is in times like this that families need to do all they can to protect themselves.”
The report’s findings suggested that spending priorities may be to blame for the lack of protection as more people considered items such as broadband, cars and phones as essential, compared with buying cover.
More than one-third said protection was a luxury, on par with shopping trips, gym membership and family outings.
Mr Jones added: “We often find people wait for a trigger, like buying a home, to get protected and instead will spend any disposable income left at the end of the month on more tangible items.”
The report was released as Swiss Re’s yearly Group Watch report showed positive growth in the UK employee benefits sector in 2011, reversing the negative trend in the previous two years.
All three product areas surveyed – death benefits, long-term disability and CI – premiums rose in 2011.
There was growth in key areas, most noticeably voluntary cover. The report’s author, Ron Wheatcroft, suggested a gradual change in the role of the employer from benefit provider to facilitator as businesses seek ways of sharing costs and giving employees more choice.
Russell Higginbotham, UK chief executive of Swiss Re, said one of the biggest challenges for group risk later this year would be auto-enrolment.
He said: “We may see some existing risk schemes grow as employee are enrolled. This will have varying effects on scheme costs. As the welfare state withdraws from universal provision, the importance of the private sector in protection cannot be overestimated.”
Mark Loydall, director of Leicestershire-based Cambourne Financial Planning, said: “More people are taking out voluntary cover because it is competitively priced in a package provided by the employer. When advisers talk about protection, it’s important to bring home the difference it can make to people’s lives and to those left behind.”