UK households leave themselves vulnerable to financial hardship
An estimated 8.5 million UK households could not cope financially if the household's main income was lost, with just a quarter (26%) of the 26 million households in the UK stating they would be financially secure in the long term, according to research by Scottish Widows. Despite these figures, just 7% of the UK population has an income protection policy in place.
The third Scottish Widows Consumer Protection Report, which details research carried out on 5,148 UK adults, shows that many people are leaving themselves, their partners, and their children at risk of financial hardship by not protecting their income.
With the research indicating under half (44%) of the UK population have life insurance, 12% critical illness cover and just 7% with income protection, millions of households are leaving themselves at risk of being unable to cope financially if one of the main breadwinners becomes unable to work in the event of critical illness, death, disability or due to an accident.
The research also shows that 44% of respondents, or an estimated 11.4 million UK households are reliant on two salaries, rising to almost half (49%) of households with children. Mortgage holders have an even greater reliance, with 51% stating they were reliant on two salaries.
56% of those surveyed stated that paying the household bills was their main financial priority, followed by making ends meet (37%), maintaining their current lifestyle (34%) and taking care of their families (30%).
When asked how they would cope financially if they lost one income, almost a quarter (23%) said they would cut back on their general expenditure. However, cutting back on general expenditure will only lead to small savings, as many of these are essential items, such as utility bills, council tax, insurance and paying the mortgage, rather than nice to have items. And with the average weekly household spend at £455 and the average monthly mortgage (Interest and Capital repayment) in the UK for new borrowers currently standing at £577 a month, any savings would quickly be swallowed up in a few months.
Clive Allison, Market Director, Protection at Scottish Widows commented, "Despite the number of households in the UK stating they could not cope financially if the main bread winner was to lose their income, the take up of protection products remains alarmingly low, with just 7% actually protecting their income. Many millions of people are not protecting themselves in the unfortunate event of illness, an accident or death of the main breadwinner, which is leaving them vulnerable and in many cases unable to afford to support their families."
"As an industry we have come a long way in recent years, however we must continue to engage and educate customers to the importance of adequately protecting themselves and their families if the worst were to happen."