Friday 13th December 2019
No one wants to think about becoming seriously ill. However, it’s an approach that could be leaving millions of people open to financial insecurity if something did happen. Research has revealed that Brits are often in ‘illness denial’ believing something won’t happen to them, even if the odds aren’t in their favour.
Focussing on the likelihood of being affected by a serious medical condition, research from AIG Life discovered many Brits are in a state of denial.
It’s normal to think that serious illness won’t happen to you, but the reality is often different. Taking an optimistic view of the world and your future lifestyle certainly shouldn’t be seen as a bad thing. However, you should take steps to ensure security should something happen.
One of the key areas where a serious illness can have an impact on our lifestyle comes down to finances. After all, it’s likely to affect your ability to work and earn an income. If you were to become too ill to work, would you have the savings to fall back on to cover essentials? The research indicates that, for many people, the answer would be ‘no’.
Not having a financial safety net can make an already difficult time incredibly challenging. At a time when you should be focussing on recovering, stress and financial concerns can have an effect. Taking steps to provide financial support should something happen not only means you can feel more relaxed should you become seriously ill but it will give you peace of mind now.
Debbie Bolton, Head of Underwriting and Claims Strategy at AIF Life, said: “Our extended lives mean we may live in poor health for longer and sometimes with more than one serious illness. Taking a realistic and practical approach to the risk of illness and the need for financial protection will help us all to plan for the future.”
You can’t predict what will happen but there are things you can do to ease the burden should something occur. These three steps can help you understand and safeguard your financial security should you become too ill to work.
1. Check your employer’s policy: The first thing to do is check what your employer’s policy is on sick pay. Employer’s don’t have to offer sick pay, but many do as part of a benefits package. Usually, if you benefit from one, they will pay your full salary for a defined period of time if you become too ill to work, however, some pay out a portion of your salary. The length of time and the amount offered varies between employers so it’s important to check what your contract says.
If your employer doesn’t offer sick pay, you may qualify for Statutory Sick Pay (SSP). This is paid for up to 28 weeks and is £94.25 per week. With outgoings often higher than this, it’s wise to look at alternatives if you’d be relying on SSP alone.
2. Build up an emergency fund: If you haven’t already got an emergency fund to fall back on, building one up should be a priority. It can give you a financial safety net when income stops or you face an unexpected outgoing. Adding to an emergency fund can improve your financial resilience and security.
Ideally, an emergency fund should cover your essential outgoings for three to six months. This gives you some time without having to worry about where further income will come from as you recover and get back on your feet. Whilst it might be tempting to lock savings away to access better interest rates, your emergency fund should be easily accessible.
3. Take out suitable cover: Even with an emergency fund in place, you could still face financial difficulty if you’re off work for an extended period of time. This is where taking out a suitable protection product can help. These insurance policies pay out under certain circumstances when you pay a monthly premium. There is a range of different policy types, which one is right for you will depend on your priorities and circumstances.
When looking for cover that will provide financial security should you become ill, there are broadly two options. Income Protection policies will pay out a portion of your usual salary until you can either go back to work or retire. This provides you with certainty and peace of mind. Alternatively, Critical Illness Cover will pay out a lump sum if you’re diagnosed with an illness that the policy covers, this may include cancer, stroke or a heart attack.
Protection and creating a financial buffer you can fall back on when necessary should form part of your wider financial plan. If you’d like to discuss the type and level of cover that would be suitable for your circumstances, please contact us.