In recent years, a third of the UK’s adults has had a financial shock – redundancy, an incapacitating injury or illness or bereavement.
Most people worry about what would happen to their mortgage and their home if they were to lose their income for any reason. Similarly, most of us plough on, believing that we’ll always be in the lucky two-thirds of the population.
Savings can help you to weather financial storms
Having a buffer of savings can help you, especially in the case of temporary (hopefully) redundancy, but if you find yourself out of work for the long-term, you might soon burn through your stash.
Start up your rainy-day pot
You should aim to have at least three months’ worth of living expenses squirrelled away, just for some breathing room. However, it’s not always easy to save money, especially as we’re all seeing the cost of living go up. There are lots of budget planners and automated savings apps on the market to help you to put away at least a small amount each month.
Another option is income protection insurance
This form of insurance is especially important if you have dependents. You could take out income protection insurance so that in the event of short to long-term unemployment or illness, your living expenses will be covered.
You might find that you’re already covered for this by your employer anyway, so do ask HR about it so you know what you already have set up for you.
Life insurance is another good idea
If you’re worried about your spouse or children paying the mortgage in the event of your sudden death, then a life insurance policy could ease your mind. You could opt for a “decreasing term” policy which reduces the amount you’re covered for – and therefore the premiums – as your mortgage is reduced.
Critical illness insurance might also help as it could off you a lump sum if you contract or develop one of several specified illnesses. You could pay off the mortgage or use the money for day-to-day living.
Mortgage payment protection insurance
This form of insurance is pricier than the others, especially when you consider that it’ll only cover your mortgage payments. However, it covers your mortgage payments! It also covers them in full and for a set period of time so you can relax.
