Redundancy Cover

1 in 3 would be penniless after 11 days out of work

More than a third of people would run out of money within a fortnight if they were unable to work. This is the startling conclusion of a survey carried out by the Yorkshire Building Society (reported summer 2008).

The findings show that 36% of people have less than £500 savings and this would run out after 11 days. The average person would manage for just 52 days on average outgoings of £1,500 per month.

1 in 5 admitted they had no idea how they would cope financially if they were unable to work, while others had unrealistic contingency plans.

Around 19% of people said they would manage on state benefits, despite the fact that that they had weekly outgoings of around £334 and would be likely to receive only £75.40 per week.

Around 5% of people said they would sell their home to reduce overheads and access funds quickly. However, the slowdown in the housing market, falling prices and rising mortgage costs would make it difficult to find a quick sale. The average time to sell a property is currently 4 months (summer 2008), significantly longer than most peoples' savings would last.

Tanya Jackson, corporate affairs manager at Yorkshire Building Society said "Finances for many are already finely balanced due to the rising cost of living and the research reveals that both savings and state benefits are not viable options for the majority of consumers to rely upon for an adequate length of time"

The two main reasons for not being able to work are redundancy and illness The good news it that both can be insured to provide you with an income should you be affected.

Redundancy: very much a threat in the current economic climate (summer 2008). Many people believe they would get several months payment despite the fact that the minimum statutory requirement of employers is 1 weeks' salary for each year's service if aged under 40 and 2 weeks' salary for each year's service if aged over 40.

Redundancy insurance is relatively cheap and can provide payments for up to 2 years.

Serious Illness: the affects can be catastrophic and cannot be insured against after the event. Insurers will also apply restrictions where there are existing symptoms that are directly attributable to a illness that develops later. The simple answer is to buy this insurance early and review the cover every few years.

There are several policies to choose from and further information about each can found from their respective links; the most comprehensive is permanent health insurance; next is critical illness; finally, if medical history is a problem then accident and sickness cover may be an option although this has a limited payment period.

Also consider the effects of a death when there is a family: most families need two incomes to afford the daily cost of living. If an income is lost following a death then the family home may have to be sold. The remaining income may not be enough for the survivor to obtain a mortgage. Life assurance is low cost solution to this problem.