The ‘cost-of-living crisis’ has replaced ‘Covid-19’ as the term that we’ve all quickly got sick of hearing; it signifies nothing but bad news.
Against a backdrop of rising energy costs and disruption to global supply chains, people are being forced to tighten their belts and find ways to protect their family as the UK experiences double-digit inflation for the first time in more than 40 years.
Many of us find ourselves in a vulnerable position financially right now. In a survey published in November 2022[1], it was revealed that a quarter of UK adults have less than £100 set aside in savings.
The lack of a financial safety net means many would potentially have to borrow money to cover any unexpected bills. The Money and Pensions Service, which conducted the research, is urging people to open up about their finances and is encouraging them to plan for their financial future, both in the short and long term.
How are people cutting back?
Many people are already being proactive with saving money.
As per the Office for National Statistics[2], nine in 10 (89%) adults in Great Britain report that their cost of living has increased, up from six in 10 (62%, 32 million adults) in November 2021.
For those who had seen their cost of living go up, the most common lifestyle changes they had made as a result were:
● Spending less on non-essentials (57%, around 26 million people)
● Using less gas and electricity in their home (51%, around 24 million people)
● Cutting back on non-essential journeys in their vehicle (42%, around 19 million people)
More than a third of those whose cost of living had gone up have cut back spending on food and essentials (35%, around 16 million people).
Almost a quarter (23%, around 11 million people) used savings to cover costs, and 13% (around six million people) said they were using more credit than usual.
These findings will resonate with you if you’ve ditched your daily Starbucks coffee or cancelled your Netflix subscription. Perhaps you’ve also kept the thermostat turned down on your central heating or car shared on your commute to work.
But these savings probably aren’t providing the financial safety net you need, meaning you continue to be exposed should things go Pete Tong.
The value of protection cover
If you’re looking for some added protection for your family during the crisis, you should consider taking out some cover in the shape of products such as income protection, life insurance and private medical insurance.
Until now, many people have turned the other cheek when presented with protection cover, for a number of reasons including[3]:
● I can’t afford them
● They’re not for people like me
● I don’t think that I’ll experience the negative events that would make these products worthwhile
● I wanted to look into this but never got round to it
● There are too many choices to make, so it’s difficult to make a decision
● I find these products too complex to understand or take out
● I don’t know anyone else who possess these products
But the (sorry for saying it again) cost-of-living crisis might – and perhaps should have – promoted something of a change of heart on protection cover.
Rather than see it as yet another cost (that you can’t afford), assess its value based on what it can offer, such as:
1. Gives you an income if you’re unable to work
Without wanting to get too political here, it’s unlikely that government funding will be enough to support you if you’re unable to work for a long period of time.
Even if you’re only on a modest salary, you’re probably going to find that state benefits bring in less income than what you’re used to. And ultimately, most of us design our lives based on our regular income, so any unexpected drop is going to leave you in a bit of a pickle.
However, if you have income protection cover in place, you’ll have a lot better chance of continuing to meet your regular financial commitments.
Income protection provides a monthly income, tax-free, if you are forced to stop work for health reasons.
Find out more about income protection here.
2. Covers your loved ones if the worst was to happen to you
Thinking about death is not something that any of us like to do. In a recent YouGov survey[4], nearly half of the people questioned said they feared their own death.
However, sometimes it’s necessary to consider the prospect that we can be here one day and gone the next. We know that’s a morbid thought but by keeping that in mind, you might be inclined to make smarter decisions about your family’s finances.
If the worst was to happen and you were to die suddenly, how would your family cope with the loss of income? In the case of lots of families right now, they don’t have £100 in savings, let alone enough to cover a major hit in household income.
That’s where life insurance can prove valuable. With adequate life cover in place, in the event of your death, the people nearest and dearest to you will receive financial support in your absence, either as a lump sum or as regular payments.
Find out more about life insurance here.
3. Provides medical treatment when you need it
Life is unpredictable. Some people predicted we would see a post-Covid economic boom. Now, that’s not really worked out, has it?
It’s impossible to know all that’s coming around the corner – from losing your job to being struck down by a serious medical condition, we don’t know what life has to serve up for us.
If your health was to suffer, you want to know that you’re going to be able to get the best care, as quickly as possible. Unfortunately, that’s not a given with the NHS right now, due to backlogs.
Private medical insurance is designed to offer treatment alongside the service provided by the NHS. It helps you get access to the right treatment you need, when you need it.
Find out more about PMI here.
Get some quotes for protection cover
Here at QuoteSearch, our cutting-edge technology compares prices and cover directly from leading providers. We don’t have any favourite suppliers – the quotes that you see are comprehensive and competitive.
So, when assessing your options in these tumultuous times, feel free to ask us to build out a policy that suits you and your budget.
To compare your protection cover quotes from leading providers, click here.
[1] https://www.bbc.co.uk/news/business-63517823
[2] https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/expenditure/articles/whatactionsarepeopletakingbecauseoftherisingcostofliving/2022-08-05
[3] https://www.aegon.co.uk/news/cost_of_living_crisisthevalueofprotectioncover.html
[4] https://yougov.co.uk/topics/society/articles-reports/2021/10/06/yougov-death-study-fear-dying