Protection cover dropping
The number of people taking out life assurance, income protection and critical illness cover is dropping on an annual basis, research from Scottish Widows shows.
The bank claims nearly three quarters (74%) of people are putting their families’ financial security at risk by failing to protect their future through life insurance, critical illness or income protection.
The research shows 6% fewer people taking life cover, 2% fewer taking income protection and 1% fewer taking critical illness cover than a year ago.
life cover now accounts for 38% of those who have protection, income protection 5% and critical illness 11%.
The report also shows over half of respondents (52%) now rely on just one income echoing recent concerns from the Institute of Fiscal Studies which stated average UK household incomes have dropped by 6.4% in real terms over the past two years.
Despite the results revealing 5% more people are saving some 60% said they would only be able to support themselves financially for up to six months if their income failed.
Almost one in three households (28%) reports that they would have used up their savings within a month if they lost their income; a fifth of people would struggle to pay their mortgage and a third would find it difficult to cover their household bills within a year of losing their income.
In the event of losing a partner 29% of people say they would need to rely on their savings to cope financially with 16% saying they would turn to state benefits.
Some 14% admit that they just don't know how they would cope should something happen to their partner.
Richard Jones, director of protection and annuities at Scottish Widows, said: “While it is encouraging to see a gradual improvement in people's attitudes towards saving, the worry is that people are not protecting themselves in the event of unforeseen events.
“Many do not have the provisions in place to support their families for any substantial period and even after just a month could be left with no buffer. It is at times like this that families need to do all they can to protect themselves in the event the unexpected happens. "
The report also confirmed that buying a home remains the primary trigger for taking out protection cover.
This was given as the main reason for one in three critical illness and 27% income protection policies.
The biggest barrier to protection, especially when it comes to critical illness cover, is cost.
Of those without a policy 22% say that they cannot afford cover and 15% consider it to be a waste of money.
Jones added: "We can see from the findings that for many, protecting their family is considered a luxury.
“We often find that 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 you can see and use immediately.
“However, we would firmly advise families put some shock absorbers in place to deal with the unexpected and avoid any hardship which could be caused as a result."
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