Almost a quarter of Brits with savings say they would not last longer than a couple of months if they were unable to work, yet less than one in 20 protects their income, according to new research.
Scottish Widows commissioned YouGov to survey 5,144 respondents aged 18 plus this time last year, revealing around 60 per cent said they would last no longer than six months if they became unable to work, while fewer than one in 10 said they would manage less than a month.
Despite a 7 per cent increase over the last 12 months in the average amount people are saving, just 4 per cent have income protection cover.
The research highlighted a gap between awareness and prioritisation for this type of insurance, with more than 80 per cent of those polled saying they have heard of life insurance, income protection and critical illness cover, while the figures plummeted to 8 per cent who have a critical illness policy, compared with almost half who have taken out home insurance.
However, one in seven have been affected by critical illness, and more than a third rely on two incomes.
Out of those affected by critical illness, 42 per cent said they had to make lifestyle changes in order to cope with the financial impact, while only one in 20 had a policy in place.
People expect their financial priorities to change the most when buying a property (19 per cent), as a result of government spending cuts and welfare benefits (18 per cent) and having children (15 per cent).
Despite this expectation, more than a third are carrying non-mortgage debt over each month, a figure which rises to 52 per cent of 25-34 year-olds and 48 per cent of 35-44 year olds, leaving a vast proportion at increasing risk if the unexpected were to happen.
Esther Dijkstra, head of protection at Scottish Widows, said that the ongoing struggle between short versus long-term financial priorities continues to threaten people’s financial resilience, despite an awareness of the risk inherent in savings running out should they become unable to work.
“Our research shows that the majority (70 per cent) of consumers look for value for money when making decisions about protection and are doing more to research their options online, yet the real lifetime value comes with investing in a safety need to suit people’s individual needs.
“Educating and informing consumers will not only build a clearer understanding of protection products and the importance of getting the right advice, but also help to improve the UK’s financial resilience which will be of increasing significance from April next year when working age welfare support for mortgage interest and bereavement benefits are scheduled for reform.”
peter.walker@ft.com
