Sudden illness could put 9 out of 10 in financial hardship

New research by Scottish Widows has found that sudden illness could push 9 out of 10 Brits into financial hardship.

The same survey also found people are more likely to insure their mobile phones than protect their finances against illness.

Couldn’t survive financially

When questioned 21% of those taking the survey said they knew their family couldn’t survive financially, but only 9% of them had taken out a critical illness policy as opposed to 12% who had insured their mobile phones.

The number of people taking out life insurance is also falling with just 27% of the population – equivalent to 14 million people – having a life policy. Figures from the Office for National Statistics (ONS) show a 3.6 million drop in just a year.

Worrying truth

Gary Burchett of Scottish Widows said: “It’s a worrying truth that people are more likely to insure their mobile phones than their own health. On a societal level, we increasingly think in the short-term, caring more about tangible things in our day-to-day lives.

“On a more fundamental level, we’re programmed not to think about the worst happening. Together, these are dangerous inclinations, as people aren’t thinking about insuring their health or life until it’s too late.

“Insurance providers have a role to play in building trust with consumers and helping people prepare financially in case the unexpected should happen.”

Precarious

The 42% of UK households which rely on just one income are in the most precarious situation.

Financial journalist Michael Lloyd said: “It’s clear many people lack a Plan B. Despite 43% of them saying they’d rely on their savings if they or their partner were ill and unable to work, a third (35%) admitted their savings would last no more than three months if unable to work and more than half (54%) say they’d last no longer than a year.”

More worrying still, official figures show more than 15 million people have admitted they don’t have any savings at all. One in five said they would rely on state benefits if the worst was to happen.

Unprepared

Mr Lloyd added: “On top of this, people are leaving themselves and their families unprepared for other aspects of illness or bereavement.

“One in five (20%) people weren’t sure who would take care of them if they fell ill and nearly half (48%) don’t have the protection of a will, power of attorney, guardianship or trust arrangement in place for their families.

No need

“When asked why they haven’t taken out life or critical illness insurance, almost a third (30%) of the UK’s primary breadwinners said they don’t see the need for cover.”
Asked about payouts on claims by insurance companies, people thought that an average of 34% of claims are paid out, but the reality is that 97.8% were paid out in 2017

“The 42% of UK households which rely on just one income are in the most precarious situation.”