According to Scottish Widows, 66% of men with dependent children provide the main income in their household, however:
- 20% of those say that their family would not survive financially without it
- More than half (58%) don’t have Life Insurance
- Just 18% have Critical Illness Cover in place.
That leaves 4.5 million households at risk of financial difficulties, should the main income be lost without warning.
What’s the danger?
A loss of income could happen to anyone, and it’s unlikely to come with a handy warning beforehand.
Reasons behind losing an income include illness, injury, redundancy and death
The three biggest reasons for households to lose an income suddenly are illness, injury and death. Therefore, while it’s not the most pleasant of subjects to think about, it is vital that you are financially prepared for such an event, especially if you are the main source of income for your family.
If your income suddenly stopped, could your household manage to pay:
- The mortgage?
- Other bills?
- Medical costs?
- Emergency costs?
Less than a fifth (16%) of men with dependent children are confident that they could cover household bills for three months. Meanwhile 45% say they will need to dip into their savings to make ends meet. 17% say their savings will last for a maximum of three months and 12% have no savings at all.
Without protecting your family against a loss of income, you risk losing their home and disrupting their life, should something happen to you or your partner.
What are the chances?
You may currently be feeling healthier than you ever have before, and that’s great. But, it doesn’t mean that you are immune to the risk of sudden income loss. Accidents and illnesses can affect anyone, at any time.
A handful of potential illnesses and conditions which could affect you are:
- Prostate cancer: Cancer Research state that one in eight men will be diagnosed with prostate cancer in their lifetime.
- Heart attack: One in five deaths in men are due to heart disease, according to Health Knowledge.
- Mental health issues: According to mental health charity Mind, men are twice as likely to suffer ill mental health due to work than women. That could lead to more dads needing to take time off work, affecting the household income. In addition, suicide is the most common reason for the death of men aged 20-49 (Source: Mental Health Foundation). If you are struggling with mental health issues, please seek help, you can contact Samaritans
We’re not telling you this to scare you, but it is vital that you understand just how common sudden income loss is, and the effects it could have on your children and spouse if you are not financially prepared for such circumstances.
What protection do you need?
To put it simply, you need to be able to access enough money to maintain your family’s lifestyle if an income is suddenly lost. It doesn’t necessarily matter how you build up that protection, as much as it matters that you have it. It is recommended to have access to savings equal to your household living costs for three to six months.
There are three main protections you should have in place:
1. What your employer pays you
In the short term, you will be able to use any entitlements such as sick pay from your employer to continue supporting your household. However, this will not last forever and your other protections will need to come into play sooner rather than later.
2. Savings and cash
This is the money that will be used to keep your family afloat for the first three-to-six months following a loss of income. The main bulk of your emergency savings should be held in a way which maximises the opportunity for growth. As there is a chance you may never need to access this money, you can comfortably keep it in an account which may take some time to access, in return for better performance options, especially if you have short-term savings available to cover the time it takes to access this capital.
The final piece of the puzzle is insurance. While paying premiums each month may seem like a chore or waste of money, it is much better than the alternative; leaving your family in an unstable financial position if something happens to you.
These are the types of insurance which may help you to make sure that your family is taken care of, should the worst become reality:
- Life Insurance: Pays out a lump sum if you die within the terms of the policy.
- Critical Illness Cover: Pays a lump sum or income if you are diagnosed with a serious illness which is covered by the policy.
- Income Protection: Replaces a portion of your normal income if you are suddenly unable to work due to illness or injury, the income starts after a pre-agreed period and ends after a set length of time.
Different providers will offer a range of options to protect your family against the effects of losing an income suddenly, so please get in touch with us to find out what types of insurance are most likely to suit your needs and circumstances.
It’s not just the financial aspects that you should be prepared for. Illness and injuries can bring big lifestyle changes and, while we all hope that it will never happen, preparation is key to managing such a situation smoothly. Many men have not yet prepared:
- A will: Your will should contain instructions about the distribution of your property, assets and money. It is important to have a will in place at all stages of life, as it is simply impossible to predict what is around the corner. On top of that, it will take some of the stress out of dealing with an unexpected death for your loved ones, as some of the hardest decisions will already have been made for them.
- Lasting Power of Attorney (LPA): If you are unable to make decisions about your health or finances for yourself, due to an illness or injury affecting your mental capacity, LPA will mean that the person, or people you appoint, are able to make those decisions on your behalf.
Of course, you should choose someone you trust to make choices with your best interests at heart and talk to them about your wishes beforehand.
- Guardianship and trust arrangements: As a dad, you want to know that your children will be looked after no matter what happens to you. Unless something happens to you both, your child’s other parent is likely to continue to be responsible for their wellbeing when you are no longer around. However, that’s not an option for everybody, and deciding who will be responsible for your children and any other dependents if you die could be left in the hands of strangers, unless you have your wishes in writing.
- Protect your spouse: Even if they are not generating an income, the other adults in your household are invaluable to the family unit. Think about how much you would need to spend on childcare, or cleaning services if they were no longer able to do the things they do every day around the home.
According to research from Legal and General, if services were brought in to replace all the things a stay-at-home-mum does, the annual cost would be more than the average full-time salary, at £29,535. Therefore, it is just as important to pass the message onto your loved ones and make sure that your family is protected from all angles.
For more information on protecting yourself, your partner and your family, get in touch.