One in three Brits worried about sudden financial shock

16 August 2018
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One in three Brits says they do not think they have the means to cope with a sudden financial shock or loss of income.

Almost a quarter (24%) do not have any savings to fall back on, according to Zurich UK.

The findings are the result of a study conducted by the insurance company, in conjunction with neuroscientist, Dr Jack Lewis. The study explores how money and the use of insurance products impact on how ‘resilient’ we feel.

It found that to feel resilient, 37% of people need to have savings, 22% need to be debt free and 17% say they need a secure job.

A third (33%) believe they need an income of £1,000 to £2,000 a month to feel financially resilient, rising to between £2,000 and £4,000 for 18%.

However, while as many as a third of people do not feel financially resilient, the study found that only one in 10 (11%) had taken out a policy to insure their income.

Dr Lewis says the findings highlight our tendency to focus on what is immediately available to us: “This study shows all the hallmarks of a psychological phenomenon called the ‘availability heuristic’. This describes our tendency to feel a stronger perception of risk and so we feel more motivated to protect ourselves against that risk.

“Examples of when car, home and holiday insurance could come to the rescue are simply much more available than the benefits of income protection, because they are more commonly encountered in everyday life.”

Income protection pays claimants a monthly benefit if illness or injury prevents them working or if they lose their job. By contrast 71% of people insure their home, 70% insure their holiday and 18% their mobile phone.

Dr Lewis adds: “By comparison, I cannot think of a single occasion when I heard someone explaining what a lifeline their income protection was when they lost their job, and I am sure this is the same for many others. We need to educate people and help them to understand that there’s support out there; there are products to ease the stress and worry of a financial shock and loss of income.”

Zurich says people often think that income protection is too expensive. However, a 35-year-old professional earning £27,000 could insure 50% for their monthly income for just £9 a month, it claims. The plan could pay out for up to two years.

Comments

In reply to by anonymous_stub (not verified)

We paid for a policy to protect our mortgage and when we needed it they refused to pay out. So we had paid out over £2000 in premiums but we were told that as the policy was coming to an end and we would have to wait before we could claim they would not renew our policy as they knew my partner was being made redundant. We would have done better to the money in the bank at least it would have given us some breathing space.

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