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Would you be able to cope if you were unable to work? Do you know how you'd pay your rent? Well, new research has found that a whopping 5.8 million renters don't know how they'd cope if they were too ill to work.
The survey conducted by Royal London revealed that almost half (48%) of working private renters have never thought about how they would cope financially with a long-term illness. On top of this, 39% of this group have no savings to fall back on at all, compared with 23% of the wider population.
While 58% of renters do have some savings – albeit less than £2,000 – this wouldn't offset the average debt per renter, which sits at over £4,600. Indeed, 32% of working renters owe between £2,000 and almost £10,000, with 14% owing £10,000 or more. This means that savers not only don't have the savings to keep themselves covered during periods of illness or unemployment, they don't even have the savings necessary to pay off their debts.
Asked what they would do if they were unable to work for three months or more, 48% said they'd apply for state benefits, while 45% stated they would reduce their household expenses and 36% said they would use their savings. Only 4% mentioned income protection.
Jennifer Gilchrist, Insurance specialist at Royal London, said: "Only three in ten renters would receive full pay if they were ill and less than one in ten have an insurance policy such as income protection that could provide a monthly income if they were ill. Just over a third of renters said they could afford to live for fewer than three months if they couldn't work, so they really need to think about what their financial plan B would be."
One of the most important things you could do to prepare yourself is take care of your debts. This might mean taking out a 0% balance transfer card to spread your debt repayments without having to pay interest, or taking a good look at your budget to see what you can do to reduce your outgoings.
Once your debts are taken care of, it's time to start saving. A regular savings account might be ideal if you can only put away a small amount every month, or you could open an easy access account if you're not sure you'll need access to the pot within a year.
If it's too much of a challenge to save up three to six months' worth of salary, or while you're getting there, it may be worth getting income protection – a small payment every month could save you a lot of trouble down the line.
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