Protecting against the threat of recession
As the threat of recession looms, more people are taking out insurance products to protect themselves in the event they lose their job.
Some economists believe unemployment is set to reach the two million mark soon, while high-profile redundancies in the property and financial markets fuel concerns. Many Brits believe things are going to get worse, with 82 per cent of consumers expecting the economic environment to worsen over the next 12 months.
Yet in the worse case scenario, most Brits admit they would not be able to survive for long - research from Combined Insurance suggests more than a third of people (34 per cent) have £500 or less tucked away for a rainy day.
With average monthly expenditure exceeding £1,281, this means many would only be able to survive for 12 days before their finances run dry.
A survey from Yorkshire Building Society also found the majority (90 per cent) of people have no personal income protection in place and if unable to work, 68 per cent either do not know how they would survive or have unrealistic expectations of how they would continue to meet their daily expenditure.
However, as confidence in the economy deteriorates, sales of accident, sickness and unemployment (ASU) policies are increasing.
According to moneysupermarket.com, there has been a 15 per cent rise in sales for these products as the credit crunch makes headlines almost daily.
Emma Walker, head of protection for moneysupermarket says: "No-one wants to think about it, but it is there in your face every night when you switch on the TV.
"Also, people have less savings and there are mass redundancies, so people want to protect themselves."
Rather than investing and making money in tough times, people want to protect what they have, according to specialist protection broker Lifesearch.
"Since the credit crunch, protection sales have gone through the roof," LifeSearch spokesperson Matt Morris says.
If you are thinking about taking out this product, the first thing you should do is think about how you would cope if you were made redundant.
How much have you got saved up, and what is your would you get from your employer in the case of sickness or redundancy? And how long would it take you to get another job?
Many employers will only give statutory pay, which is £75.40 a week, but some have their own sick pay scheme - although it may be limited to a few weeks. As for redundancy pay, you may only be entitled to a week's pay for every year of continuous employment.
There are several products on the market designed to make protection policies cheaper and less complex, covering the 'gaps' in insurance that many have.
Lifesearch has launched a new product with Fortis called Real Life Cover, which offers life insurance, income protection and limited critical illness in one plan. Unemployment cover can also be included.
Importantly, if one part of the policy does not pay out, another will - so you are covered in all eventualities.
Tom Baigrie, LifeSearch managing director, says: "Consumers need more than life assurance and yet 70 per cent of the industry's sales provide 'death only' cover. In the past this has been because the alternatives are either too expensive or complicated for most people.
"Everyone who does not already have full disability and life benefits should consider Real Life Cover, it's easy to follow and is built to be failsafe and clear."
Currently, the product is available from Lifesearch, Asda and Fortis, although there are plans to distribute the policy more widely. Other companies are tipped to launch their own version of Real Life Cover soon.
Another new policy comes from recently launched helpucover.co.uk, a website selling insurance cover to fill in the "gaps in our safety net".
Its income protection policy features a 'back to work support service' which offers practical help and support including jobseeker packs and employment workshops where a professional consultant discusses and provides advice on topics such as CV writing, job application forms, interview techniques and even changing career.
Barbara Morgan, head of marketing for helpucover, says: "The recent launch of helpucover couldn't have come at a better time for homeowners."
If you do decide to go ahead with a policy, moneysupermarket.com advises to think about what you may need and compare the benefits policies provide, not just their price.
Ms Walker suggests working out how long you could last without an income, as policies with a deferred period are cheaper than those that pay out straight away.
As with any policy, you also need to check the exclusions carefully.
"The main thing is to know what you are buying - don't just buy the cheapest policy, and make sure you know what you are entitled to," Ms Walker says.
Importantly, the time to buy a policy is before you have any inkling your job could be at risk - if your firm announces redundancies, you will not be covered if you subsequently take out a policy.
Sarah Routledge
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