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Life Insurance: I’m alright, it won’t happen to me

New figures show worrying new chasms opening up in the so-called “protection gap” – the cash shortfall Britons would face if they were struck by a serious illness or another financial disaster.

Despite more than a fifth of people admitting their household wouldn’t survive financially if they lost their income due to long-term illness, fewer than one in 10 have a critical illness policy, which pays out a lump sum on the diagnosis of a life-threatening health problem. In fact, we are more likely to insure our mobile phones than protect our health, according to new figures from Scottish Widows.

Taking out life insurance – which pays out a lump sum to the nearest relative when someone dies – also appears to be falling down the public’s priority list, with just a quarter, around 14 million people, currently covered. This represents a staggering 3.6 million fall in the past year.

No plan B
At a time when 42 per cent of UK households still rely on only one income, and welfare reform has seen huge changes to benefits, a third of Britons say their savings wouldn’t last more than three months and a half wouldn’t get by for more than a year. Three in 10 or 15.5 million people aren’t saving anything at all.

Last year, 3.5 million people diagnosed with a critical illness faced a shortfall in their income, separate data from Royal London found. A third had to take six months or more off work.
The majority of those caring for a loved one have either had to take time off work or reduce their paid hours.

The additional cost of being ill or caring for someone who is ill can equate to £1,623 a year. Those with a critical illness attend five hospital appointments a month on average, with transport to the hospital, doctor or chemist being the most common extra expense, at £391. One-third report higher utility expenses, averaging £675; one in six needed home alterations coming in at £1,764.

Statutory Sick Pay currently comes in at just under £90 a week for a maximum of 28 weeks. It wouldn’t cover the extra expenses of falling ill, let alone help make up the income shortfall.
And yet, when asked why they didn’t have life or critical illness insurance, almost a third of the UK’s primary breadwinners said they didn’t see the need for cover.

Myths and mistakes
But there’s also a serious lack of trust involved. On average people think just a third of claims are accepted by insurers each year in a bid to avoid paying up. In fact, in 2017, 98 per cent of all protection insurance claims were paid.

Take action now
For a full review of your Life insurance and protection, needs call The Mortgage Company on 0115 9518898, to speak to one of their expert protection advisers, who can tailor a package to suit your needs and budget.

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