Around 50 percent of the UK workforce could struggle to pay their bills if they were too ill to work for over three month, according to new research by independent adviser Drewberry Insurance.
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 percent saying they had been off work for more than three months, over 50 percent said they do not have savings or sick pay in place to pay their bills if they cannot work beyond three months. Firstly, when asked ‘In months, what is the longest period of time you have ever been unable to work due to illness or injury?’ the survey revealed that 19 percent had been off work for over three months.
Yet the financial cover they have in place is limited. The next question asked ‘In months, for how long would your employer continue paying your salary if you are unable to work due to illness or injury?’ and 58 percent said they would not receive anything beyond three months, while 24 percent have no sick pay at all(over and above Statutory Sick Pay of £87.55 per week for up to 28 weeks). Savings do not offer much help either. When asked ‘If you were unable to work and lost your income, how many months could you survive living off savings?’, 55 percent said three months or less. Cross sectional analysis showed that of those respondents that stated they had less than one month in savings, 41 percent 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 available is £108.15 per week, even the median family would need to cut their household expenditure by 48 percent 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 percent of people surveyed have an Income Protection policy, despite 25 percent buying pet insurance. This is especially surprising given the cost of income protection and pet insurance are fairly comparable:
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. “We always suggest Income Protection as the most important type of insurance to protect against this type of worst case scenario. It replaces your income tax-free when you’re too ill to work and pays out until you’re well enough to work again or until the policy ends. You can choose for it to pay out until you retire so you are protected for the rest of your working life.”
