UK households aren’t prepared for unexpected financial burdens

Many Brits don't have a backup plan in place for if they faced unexpected financial difficulty, a new study has shown.

Research gathered by Scottish Widows for its latest protection report shows that while 21 per cent of Brits admit that an unexpected loss of income would leave them in financial trouble, they don't have any contingency plans in place for this occurrence.

In fact, 25 per cent of Brits state that they could only afford to pay household bills for a maximum of three months if they or their partner were unable to work due to long-term illness, while 26 per cent believe they could only make a maximum of three monthly mortgage payments. A further 18 per cent admit to not knowing how long they would be able to cope with their mortgage payments.

Despite this, taking out life insurance or critical illness cover still doesn't seem to be a priority, with amenities such as an internet connection ranking higher in terms of priorities.

While 81 per cent of Brits consider their internet connection to be essential, and 72 per cent feel the same way about their mobile phone, just 29 per cent see providing financial security for dependents in the event of a critical illness as a priority. In addition to this, only 40 per cent of people think that it's essential to provide security for dependents if they die.

People could be unintentionally putting themselves in additional financial difficulty in the event of a loss of income, as just 32 per cent of Brits hold a life insurance policy and nine per cent have taken out critical illness cover. Instead, 36 per cent state that they would dip into their savings if they found themselves in a position where they or their partner were unable to work.

What's even more worrying is that if people needed to make cutbacks to spending, 12 per cent would reduce the amount they spend on life insurance and 13 per cent would decrease their critical illness cover. In contrast, just nine per cent would consider putting a stop to or reducing the amount they spend on internet access.

Johnny Timpson, protection specialist at Scottish Widows, said: "No matter what our personal circumstances, it is vital for all of us to ensure we have an appropriate plan in place to protect our finances, helping avoid the need to dip into our savings, which could present even greater challenges further down the line."