It is therefore with some trepidation that we include some statistics in this article. On the other hand, few people reading financial articles are likely to share the ‘popular’ fear (even ignorance) of statistics and their use can make things much clearer.
So here we go. According to recent research undertaken by Aviva for its Family Finances Report
- 93% of families do not feel that have adequate financial protection;
- 89% are without income protection insurance;
- 87% do not have critical illness insurance; and
- 61% do not even have basic life assurance.
Perhaps even more worryingly, two-thirds of all divorced parents with two or more children said they have no, or inadequate financial protection.
Why do people ‘not bother’ with insurance?
According to the research, one in five people believe that life insurance will be too expensive, while one in twenty think it “never pays out”, so it is not worthwhile. In fact, Aviva’s own figures show that cover can cost as little as £5 a month and it says it pays out on 99% of all life insurance claims. The average claim it says, is more that £50,000.
Critical Illness insurance can be more expensive and the older you are when you start your critical illness or life cover, the higher the premiums will be. There are clearly very good reasons for taking out cover as early as possible, while you are young and healthy.
Perhaps they don’t know how important it is?
According to Aviva, a quarter of the families questioned said that they had already experienced what it is like to have the main breadwinner out of commission and unable to work due to illness, so they know how important that can be. Furthermore should the breadwinner die, there is no chance of getting better and going back to work.
A plan of action
The importance of adequate protection cannot be overstated. Of course you cannot do everything at once, especially if money is tight, so addressing the most important issues first is a good idea. With careful planning, you can ensure that costs are not too high. For example, using a plan that pays out an income, rather than a lump sum, on death can be
less expensive. Selecting a longer ‘waiting period’- the time after the onset of illness before a claim starts to be paid-can also reduce the cost of income protection insurance. In some cases, critical illness insurance may be an alternative, although this will not pay out in every instance, whereas income protection tends to be more comprehensive in its
You should always take individual professional advice before making any decision relating to your personal finances.