How Long Could You Cope without an Income?

04-Mar-2010

If you are currently employed, or your partner generates the household income, it's worth giving some thought to how you would manage if the money dried up.  Most of the time, this happens very suddenly and unexpectedly, either through redundancy, illness or the death of the 'breadwinner' in the household.  Whatever else you are going through at this time, you need to ensure that you have sufficient funds to cover the living costs of you and your family.

Ask yourself the following question; if my income stopped today, how long would I be able to manage financially?  Consider not only groceries and other day-to-day expenses, but also rent or mortgage bills, school fees and credit card repayments.  If the answer is 'I'd be lucky to manage an entire month', the alarm bells should be ringing.

Research carried out by life insurer Friends Provident shows that you certainly wouldn't be alone if you've failed to make provisions for the loss of the breadwinner in your family.  As many as 24 million people in the UK have absolutely no insurance in place to protect themselves and their families against loss of earnings.  Of those that do have some degree of protection, many were found to be underinsured by an average of 14,500GBP per year or around 1,200GBP each month.

Of the people surveyed, a third thought that they could live on less than 35% of their take home pay in the event of losing their income, which in practice would be nigh on impossible to manage.  The problem in many cases where people do have insurance is that they took this out at an earlier stage in their life and have not updated the policy as their circumstances changed.  In a relatively short period of time, marriage, children and mortgage commitments can completely change your priorities, and it's essential to make sure that your dependents and your lifestyle are protected.

Ed Stuart-Brown, head of protection sales commenting on the Protection Oversight research (carried out for Friends Provident) said: "The findings in the Protection Oversight research are very worrying. Imagine being told that you had just been given a 66% cut in your income - the impact of that for most people would be catastrophic. It's time people took control of their future and looked at this in a responsible way, instead of burying their heads in the sand, especially in today's environment.  Ignorance is not bliss, it's irresponsible."

So what should you do to ensure that you're properly covered?  Firstly, if you have any existing policies, dig them out and have a read through them to see what level of cover you currently have. Make an appointment with your financial adviser and talk through your options based on your current income, the number of dependents you have, and the scale of your monthly financial commitments.

If you do not have an adviser, you can request a callback from an experienced insurance adviser by filling out our short life insurance form.  This adviser will be able to give you quotes and advice, all of which will come with no obligations to proceed.

Before you make the call, you can also visit our Life Insurance pages to read more about the types of cover that are available or use our Life Insurance Needs calculator to estimate the level of cover that you should have.