You can plan for sickness
Have you heard that for people who are off work on long-term sick the banks are saying 'Just you take a good rest, and don't worry about the mortgage, until you get better'?
Nope, me neither.
If you have to stop work, the bills keep coming, and even if you do qualify for the full rate of Employment & Support Allowance, you may be living on an initial £73.10 per week. Also bear in mind that ESA (Employment and Support Allowance) is a lot harder to get than the old Incapacity Allowance.
And, as the lotto ad says – ‘it could be you' - unfortunately. Aviva have revealed just this week that nearly a third (31 per cent) of UK adults have had to take leave due to a critical illness such as a cancer diagnosis, and over three-quarters of them have seen their finances suffer as a result.
Incomes generally drop by a quarter (24 per cent) and savings and investments fall by two fifths (40 per cent).
If you have young children, the impact of a health setback is particularly harsh for you. Over a quarter (27 per cent) of parents with young children have been affected, and nearly all (91 per cent) say it hit their finances hard.
Here's what parents with young children have been forced to do, in such times of ill-health-induced hardship. If you are a parent, you may wish to look away now.
A third of parents had to seek assistance from the government. A third had to cut back on luxury spending for the family. A quarter had to dip into their ‘rainy day fund.' Two in five had to sell personal possessions. Two in five had to borrow from a family member. Two in five had to stop saving for retirement.
Not much fun, having to refuse the kids their school trip, or borrow from your relations, when you're at a low from your illness as it is.
One in six people (15 per cent) had to downsize their house, move in with family, or, in a few cases surveyed for the report, even became homeless.
There's also the see-saw effect. Coming off work doesn't just cut your income – on the other side, it increases your debt. Those getting over an illness have 47 per cent more debt than their work colleagues – (£9,692 versus £6,573 on average) – suggesting again that many may have borrowed, to cope with their convalescence.
Aviva tells us that there are 1.9 million people in this country, who went through an unexpected illness, who do not think their finances will ever recover.
Aviva is not trying to put the fear of God into us by depicting extreme situations. These are real situations, based on a survey of over 2,500 UK adults.
This is what really happens, if you are struck down by an unexpected health setback, and you do not have critical illness insurance in place. This insurance is a safety net to catch you, and give you a large tax free lump sum that could, for instance, pay off your mortgage, or tide you over until you can return to work.
Illness can strike at any moment. It's better to sit down with family members right now, and have that ‘what would I do if....' conversation. The answers may lead you to conclude that critical illness insurance is not just a desirable option, to secure the financial future of yourself and your family – it is an essential and crucial form of family protection.
Health setbacks are not pleasant to think about, but like everything else, it's better to plan, before they happen – because those bills and payments won't go away!
Michael Kennedy is an independent financial adviser and pensions specialist, and can be contacted on 028 7188 6005. For further information go to ‘Kennedy Independent Financial Advice Ltd' on Facebook.