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The average family would only be able to maintain their lifestyle for 46 days if they were to lose their main source of income, a new study has revealed. This means that people may have less than two months to find an alternative income stream, during what would probably already be a highly stressful time.
The estimate from Post Office Insurance is based on the average UK monthly household income (£3,156 after tax), taking into account average savings (£10,741), monthly spending (£1,313) and debt repayments (£8,759). Of course, everyone's situation will be different, and the research shows that different groups will have different levels of risk.
Working families with parents in their 30s and 40s need to be particularly careful as, despite having less debt, the figures show that they would only be able to maintain their lifestyle for a few days without an income. Even more vulnerable are those groups whose basic living costs exceed their income already, with millennial consumers, renters and those with a household income in the bottom 20% particularly at risk.
Overall, 24% of UK adults feel their household doesn't have a contingency plan in place if they were to lose their income for four weeks, while 34% have no plan if their income disappeared for six months or more. This is reflected by the fact that only 47% of main earners have life insurance in place.
It may be hard to think about what would happen to your family if you fall severely ill, have an accident, get made redundant or pass away. However, it's important to talk about it and plan for every eventuality. If you, like 26% of people, think insurance is too costly, then you could follow the example of 19% of families and build up a savings nest egg for the future, or invest as 12% have done.
Don't dismiss insurance entirely though, as Rob Clarkson, managing director of Post Office Managed Services, said: "There is a common misconception that life insurance and critical illness cover can only benefit the very wealthy who have a large amount of assets, but many families could benefit from it, if only to protect their day-to-day lives at a difficult time."
Whether you choose life insurance, income protection, a savings pot or some other means to secure your future in case something bad happens, make sure that your contingency plan can keep you or your family going a bit longer than 46 days.
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