Protection timebomb ticking as consumers spend all of their salary or more
Cash-strapped consumers could be in much worse financial shape if they keep spending on the here and now and fail to provide an adequate money safety net should the worst happen and they fall seriously ill, it has been claimed.
Protection provider Bright Grey said that research which shows that a third of British adults have nothing left from their monthly salary or are in debt underlines individuals’ financial vulnerability in the face of sickness or illness.
The provider’s Financial Safety report suggests that one in three (33%) of adults spend more than their salary or just about manage to break even each month. Over 11 million British adults (23%) just about match their outgoings to their net monthly salary, with nothing leftover at the end of the month. Some 4.9 million (10%) spend more than their salary on a regular basis.
Last year research carried out by Swiss Re suggested that consumers are more aware of their lack of financial protection but remain more focused on reducing their levels of debt than ensuring they have adequate levels of protection in place.
Swiss Re’s study argued that the economic downturn has resulted in a shift in consumer awareness towards the need for greater self-reliance and financial protection. However, consumers are delivering an "austere self-assessment of their financial exposures", Swiss Re said, resulting in a "never-ending circle of uncertainty".
While Swiss Re’s research suggests that affordability is a "fundamental" barrier to consumers taking out life insurance, Bright Grey’s research suggests that consumers spend an average of just £30 per month on protection cover out of an average monthly spend of £1,315. Bright Grey said in comparison, consumers spend £56 on telephone bills and £232 on supermarket and other forms of shopping.
Roger Edwards, proposition director at Bright Grey, said it is a “false economy” to believe that just spending on the here and now is going to keep Britons “in good stead”.
“By cutting back slightly on some of their outgoings, most adults should be able to find a small amount of money to help provide the ‘financial safety net’ they may need in an emergency situation,” Edwards said.
Individuals’ potential financial vulnerability was also revealed last year when a survey for CLIC Sargent, the children's charity, said that the unexpected costs of travel, childcare, food and accommodation while their child has treatment for cancer means that 66% of parents have to turn to borrowing to make ends meet.
CLIC Sargent’s research showed that three in five (58%) parents of children with cancer said they had to reduce the number of hours they worked, while a small but significant number (6%) said they had turned to high interest, short-term payday loans to cope with the additional costs.
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