The average household would last 24 days without income
Legal and General (L&G) recently ran a report which was released in November 2020 which looked at how financially resilient households really are. In the report detailed in Cover Magazine, it explains that the average household believes it could last 90 days, if it were to lose its income and rely solely on savings. However, in reality, it is just 24 days.
These are just some of the findings which were revealed in this year’s report, which L&G have produced since 2013.
The report assesses the financial stability of people across the UK by analysing how long they believe they could survive financially if they lost their income.
The perception of those surveyed this year was that the average household would be 90 days from the breadline if it lost its income. But, in reality, L&G calculated that the average household could only last for 24 days. A difference of 66 days.
The report helps advisers highlight to their clients that perception is very different from reality, which can have a real impact on financial planning, especially if households are underestimating how far their savings will stretch should they fall ill.
How do people cope with losing their income?
One of the main ways people cope with losing their income is to rely on their savings (1 in 3). Yet the report shows that 1 in 5 households have no savings at all and 2 in 5 households have less than £1,000 in savings.
The report found that people felt they would need £12,207 to feel financially secure. This would take the average household four years to save up, based on the average of what is saved each month. Worryingly, this means that it could take 14 years to save a full year’s earnings.
All of this means that income protection is more important than ever
This report also clearly shows that protection, and especially income protection, is an increasingly important part of financial advice and planning.
If the main breadwinner was unable to work due to incapacity caused by illness, or injury resulting in a loss of income, it wouldn’t take a family very long to eat through their savings. Just 1 in 10 people who took the survey believed they were their own biggest asset. The ability to earn an income is far more valuable than more tangible assets like their property, cars or savings.
In times of hardship, people look to protect what they have.
Source: Cover Magazine November 2020
The report can be viewed at legalandgeneral.com/d2b
What is income protection?
Income Protection Insurance helps to protect your income if you are unable to work as the result of an accident or sickness.
Income Protection Insurance could provide you with a tax-free income* and would continue to pay out until you are able to return to work or until you retire.
How does Income Protection Insurance work?
It pays out a monthly benefit if you cannot work due to illness or injury. The benefit can be used to help pay monthly bills, replace income and/or cover mortgage payments. Most Income Protection policies will provide monthly tax-free payments equivalent to between 50% and 65% of gross salary, although some companies will offer up to 70%. This cover does not typically include redundancy cover.
Our advice comes with no obligation or hidden costs. You don’t pay us directly but we do get paid by the insurer if you decide to start a policy with them
*The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.
Are you financially resilient?
Whilst you are welcome to get a quote online, we would recommend you speak to one of our advisers.
Any quote that your adviser provides you with will take into account your circumstances and medical history, as well as your budget!
An online quote is just that – a quote – it isn’t a definite offer of cover. What really matters is the premium you are offered, after your application has been assessed.
Call Freephone 0800 644 4468 – Monday to Thursday from 09.00 to 19.00 and on Friday between 09.00 and 17.00.
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