Around 50% of UK workers are playing with fire when it comes to insurance

9th February 2015


Around half of the UK’s workforce is playing with fire when it comes to being adequately insured new research claims.

The analysis, by independent adviser Drewberry Insurance, found that financial crisis beckons for one in two of UK workers who would struggle to pay their bills if they fell ill.

In the survey, employed and self-employed individuals were asked questions about how able they are to replace their salary if they cannot work. Despite nearly 20% saying they had been off work for more than three months, over 50% said they do not have savings or sick pay in place to pay their bills if they cannot work beyond three months.

When asked what has been the longest period of time they have ever been unable to work due to illness or injury, the survey revealed that 19% had been off for more than three months.

Despite this the financial cover they have in place is limited and 58% admitted they would not receive sick pay for anything beyond three months, while 24% have no sick pay at all.

Savings do not like they are going to offer much help either as 55% said they could only survive for a maximum of three months if they unable to work and lost their income.

The analysis showed that of those respondents that stated they had less than one month in savings, 41% said they had no sick pay entitlement. This means that a significant proportion of this sample effectively have no safety net other than state benefits.

In another question the participants were asked how much they needed each week to pay all their household bills. The median answer was £208 per week. Given the maximum amount of Employment and Support Allowance (ESA) available is £108.15 per week, even the median family would need to cut their household expenditure by 48% to survive on ESA, once their savings and employer sick pay run out, which is unlikely to be possible.

The best type of insurance to protect workers financially is Income Protection, yet only 7% of people surveyed have an Income Protection policy, despite 25% buying pet insurance. This is especially surprising given the cost of income protection and pet insurance are fairly comparable. (See table):

Product Income Protection Pet Insurance
Insurer Liverpool Victoria Pet Plan
Insured James the Accountant Rex the Labrador
Age 30 years old 4 years old (28 dog years)
Basic Cover £19.98 per month £20.93 per month
Comprehensive Cover £42.50 per month £50.02 per month
The income protection policy is for a non-smoker and the policy pays a monthly benefit of £1,500 after 4 weeks of incapacity. The basic option could pay out for a maximum of 2 years whereas the comprehensive option could payout until age 65. The basic Pet Plan option is for their ‘Essential’ product and the comprehensive option is for their ‘Ultimate’ product. Information on the coverage of these products can be found here.

Tom Conner, director at Drewberry, said: “The survey has highlighted just how financially vulnerable the UK workforce is to ill health and disability. Clearly if you have limited employer sick pay and savings and no insurance a family would need to rely on benefits, which are only a very basic safety net. Unless a family has other income streams to help them they will need to dramatically slash their expenditure. That could mean taking drastic action to reduce debts such as selling the family home.”

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