Blog

We’ve all learnt many things as a result of Covid-19; that we can work well from home; that there is a thing as too many quizzes; that we make good or terrible teachers; that we can put on weight far too easy or can turn the living room into a gym; that isolation can be really tough or the catalyst for new invention and a new appreciation for how we value our time and what we do with it. However, I think one of the main things we’ve learned is how financially fragile so many of us are – that a financial back-up plan is vital to get us through difficult times. Fortunately one of the things our government got right in many, although not all, respects was the financial assistance it provided. One of the first things the government announced was the Job Retention Scheme followed by similar arrangements for self-employed workers. More than one in four UK workers (8.9 million) have been furloughed since the scheme began and 2.6 million self-employed workers have applied for the SEISS grant. It could be easy, when we finally come through the other side, because of this safety net, to forget how fragile we were. Or equally it could be easy to think should we hit difficult times again that the net will be there to catch us. Now that may be true if something on such a global scale hits us, but what if the cruel hand of fate doesn’t grab us all but simply points a finger at you? What if the illness that comes isn’t the result of a pandemic but is something much more personal - A serious injury, a critical illness, a mental health issue, a life changing condition? According to research by the insurer Legal and General, the average UK employee and their household is only 32 days from the breadline. 46% of us have less than £1,500 in savings with 23% having none at all. That means nearly half of us are effectively one missed pay packet away from serious financial trouble. Statutory Sick Pay is just £95.85 per week for 28 weeks and after that, state benefits are unlikely to be any better. For most of us this is a huge difference to the 80-100% of pay received whilst furloughed. According to the Office of National Statistics, the average household spends £572.60 per week. So how would many of us would cope if we were unable to work due to a prolonged illness and forced to rely on the state? The answer is that most of us couldn’t, or at least we couldn’t live in the way we do now. Most people, when questioned, think their biggest asset is their home or, if renting, their car. It’s not – YOU are your biggest asset. And yet, we insure our home, our car, our phone and even our pets. But how many of us insure ourselves? According to the Mintel Report of 2020 less than one in 10 adults in the UK have something in place to ensure their income is secure. For mortgage owners this figure rises to only 19% but for the self-employed, possibly the most vulnerable group when it comes to financial resilience, this figure is at 9%. If you’ve not considered protecting your income before maybe now is the time to do so. It doesn’t need to cost much but income protection is a much more complicated product than simple life insurance as it’s designed to be flexible enough so as meet the needs of each individual. It also doesn’t cost anything to speak to a broker to find out exactly what you can cover, the options for underwriting and how much you will need to spend. As the main bread winner in my family I know how much everything depends on my ability to go to work each day and earn a living. I know how quickly things could fall apart if I wasn’t able to, how quickly the dominoes would fall. If this pandemic has reminded us of anything, I think for many us, it’s that the unexpected can happen without much warning and if it does, we need a plan B.