38% of renters say that they would not be financially secure if their main household income was suddenly lost.
For most people, not being able to pay rent is their biggest housing worry. According to Scottish Widows, more than half (51%) of people are kept awake by the thought of unexpectedly losing their household’s main income. Other concerns include:
- Paying high rent (46%)
- Property issues, such as mould (36%)
- Unprofessional landlords (39%)
- Being forced to commute (26%)
- Living alone (21%)
Given the severity of those concerns, it seems logical to have protection in place just in case they come true.
However, 39% have no back-up plan to pay their household bills if they should fall ill and be unable to work for a period.
That’s over 4.14 million people who could ultimately be left homeless.
Could you survive a financial shock?
A financial shock occurs when the main household income is lost suddenly. This can happen for numerous reasons, including:
- Long-term illness
- Separation of a couple
- Family emergencies which call for one or more people to stop working
In the UK, almost a million people are forced to stop working due to illness or injury each year. (Source: LV)
How would you fare if it happened to you or your partner?
A third (33%) of renters plan to use their savings in such an event. However, the average amount saved by each person in rented accommodation is just £9,260 (Source: Scottish Widows).
The scary thing is, as an average, that means that almost half of people have less than that in savings.
The average household spends £554.20 each week (Source: ONS), meaning that those savings will only last 16 weeks, or four months.
31% of people would turn to benefits to pay their rent if their income suddenly dropped. But, with an average processing time of 22 days per Housing Benefit claim in 2017/18 (Source: Gov.uk), there is a high chance of missing payment dates whilst waiting for government assistance.
How can you protect yourself?
Ideally, your financial safety net should be a combination of insurance and savings. There are three types of insurance to consider when looking to protect yourself against a financial shock:
Life Cover: Also known as Life Insurance. This will pay a lump sum, or income, to your named beneficiaries if you pass away within the time covered by the policy. It is usually better to take out a policy while you are young and healthy, as the monthly payments will be much lower.
Critical Illness Cover: If you are diagnosed with a potentially life-threatening and serious illness or condition, which is covered by the policy, Critical Illness Cover will pay a lump-sum.
Income Protection (also known as Permanent Health Insurance or PHI): You can purchase cover which replaces a portion of your monthly income if you are unable to return to work for a period of time. However, it is unlikely that this will cover your full income, so it is best to have savings available to make up the shortfall.
Your emergency savings should contain at least enough to pay your household expenses for three months. However, unexpected financial shocks are just that; there’s no easy of knowing how much you will need to rebuild your life in the event of illness or injury, so having a little bit extra is sensible.
Why does it matter?
“It won’t happen to me” is a naïve excuse to say the least.
Anything can happen at any time and you are neither immortal or untouchable, so having financial security is of vital importance to us all.
Being responsible for your financial security is not only sensible, but it can also improve your mental outlook. Knowing that there is a plan in place in case something goes wrong means that you can sleep better, safe in the knowledge that, even in the face of disaster, you won’t need to worry about money.
Further still, having your own finances in order both means that your family and loved ones do not have to worry about your wellbeing. You will not have to rely on someone else’s finances to keep you afloat, if you have already taken care of your own.
Finally, it is nice to be in a financially secure position and know that, if any of your loved ones needs help, that you are able to offer it without worrying too much about putting yourself into financial difficulty.
Looking for a hand getting started on creating your safety net? Get in touch with Bev or Sarah on 0115 9338433.