Do you have a financial back up plan? - Income protection - News - Moneyfacts

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Do you have a financial back up plan?

Do you have a financial back up plan?

Category: Income protection

Updated: 22/07/2015
First Published: 22/07/2015

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

What would you do if you couldn't work for any reason? Could you afford to cope financially? Chances are, you'd find it a struggle, which makes it particularly worrying that just 29% of workers currently have a financial safety net in place, according to research from Aegon.

But, even those that do have a back-up plan may not be on the right lines. Of those who said they've got a financial safety net, 63% would use their savings to replace their income while a third would downsize or sell a second home to release additional funds. A further 19% said that they'd rely on a spouse or partner's income to cover them, with the same number saying they'd rely on inheritance.

In fact, just 15% said that they had a suitable income protection policy in place to fall back on and cover them in this kind of scenario, which could leave a huge number of British workers at risk of financial difficulty should they be unable to work.

This is something that should never be contemplated. Being able to cover everyday expenses without a steady income would be difficult enough, but what about essential household bills such as gas and electricity, or your mortgage payments? Even your savings probably won't be enough to cover you for too long, and if you don't have a suitable fall-back option, you could be putting your home at risk.

"When making long-term plans it is important not to overlook the obvious and be caught off-guard financially," said Dougy Grant, protection director at Aegon. "Unexpected events such as illness or unemployment have the potential to derail the families' finances, so it's vital to have a backup plan. Without one, families can be one step away from financial breaking point.

"It's sensible to have a financial safety net. That way money becomes less of a worry in the event of a financial emergency and you can turn your attention to the things that really matter. You need to be realistic and consider, if you suffered a crisis like a serious illness or job loss, whether you'd be financially prepared to handle it. Reliance on savings is not necessarily the right answer and they may be too small if things were really bad."

Don't run the risk! Spending money on income protection may seem like one more bill you begrudge paying, but it really can be invaluable should you need it – you'll be able to retain an income even if you were out of work, so if you don't yet have a financial back-up plan, it's time to consider getting one.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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