Life insurance Updated:
What would you do if you lost your income? This is perhaps an even more pressing question for larger households, as needing to support a family after losing the main source of income could prove difficult. Research from AA Life Insurance has revealed just how tough it could be, with half of households admitting that they'd struggle to make ends meet.
According to the survey, more than two-thirds (69%) of those questioned would have to use their savings to stay afloat, but for those with a limited savings pot, that won't be an option. Perhaps that explains why 17% would be reliant on a credit card – a figure that rises to 41% of those aged under 35 – and even then, 50% would struggle to pay for essentials.
In fact, 54% would struggle to pay for car running costs, while 50% cite utility bills as being the trickiest to pay. A further 43% admit that paying for regular household bills would be difficult, and worryingly, 36% would find it difficult to pay their rent or mortgage and 25% wouldn't be able to afford groceries.
Another 61% said they'd have trouble with other outgoings – 67% would find it tricky to pay for holidays while 51% couldn't afford to buy a car, 50% would have difficulty paying for home improvements and 37% wouldn't be able to afford car repairs. But, given that they're not essentials, hopefully these are the areas that would be cut back on should the worst happen.
Happily, 78% of respondents have savings set aside for an emergency, amounting to an average of £9,359. However, even this may not last long in the face of a serious reduction in income, which is why it's so important to have another back-up plan.
Mark Huggins, director of AA Life Insurance, commented: "It's always wise to have a financial safety net, so it's good to see that so many people are saving. But figures suggest that the average weekly spend of a British family is £517, which would mean that a family with savings of around £9,000 could see them disappear in around 18 weeks.
"The thought of relying on a lower or no income at all can be daunting, especially if there are children or other dependents to think about. I think most people recognise that having a financial plan in place in case something happens to the main breadwinner is a wise thing to do, yet many people understandably find it a difficult topic to broach with their family. But if the worst happens, life insurance can provide a vital lifeline."
Knowing you've got suitable life insurance can be a huge weight off your mind, and if you needed it, it could be invaluable. It could provide a lump sum to help cover bills and other costs, or could even be used to help pay off the mortgage, helping ensure you're not left with financial concerns during an already stressful time.
But, this isn't the only time when the household income could suffer, which is why critical illness insurance and income protection are two other insurance policies that should always be considered. These will provide valuable financial input should you be diagnosed with a serious illness or suffer from long-term ill health, either in the form of a lump sum (critical illness) or a regular payment (income protection).
Making sure you're fully covered can mean you needn't struggle should the worst happen, and will ensure you don't exhaust your savings in the process.
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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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