In its efforts to reduce Britain's deficit, the UK government has been forced to cut back on many areas of spending, including the benefits provided to people who are on low incomes or are not working. This means that families are increasingly vulnerable to changes in their circumstances, as the state safety net is being slowly taken away.
This article looks at ways to protect the financial security of your family, and argues that income protection insurance is now more vital than ever in these uncertain times.
There is now a significant and widening gap between what the state provides in benefit payments and what people actually need to maintain a reasonable standard of living. As a result, people are increasingly on the lookout for private alternatives to protect them against unforeseen financial difficulties.
Among the biggest worries for all working families is the fear of the main breadwinner being made redundant or rendered unable to work for medical reasons. In such circumstances, there is likely to be a tremendous financial strain put on the family, as they worry about how they are going to meet all their commitments like the mortgage and utility bills.
One of the traditional ways of guarding against future financial worries is by accumulating savings in a bank account that can be accessed in the event of a shortfall - sometimes known as a 'rainy day fund'. However, there are two problems with this measure. Firstly, not everyone has the opportunity to build up a good sized pot of savings, and secondly, those that do are liable to be penalised by the state, as households with over £16,000 in savings are disqualified from accessing most benefits.
An alternative to relying on savings or benefits is to take out a lifestyle protection insurance policy. These policies usually take a monthly payment of £20 or £30 from you while you are in work, and if for some reason in the future you are unemployed or unable to work, the policy provider will provide you with payments that will enable you to continue your standard of living and meet all your household costs and expenses until you are able to resume working again.
These payments from your insurance provider are not subject to tax, so the amount you ask for when you sign up to the policy will be the amount you actually receive. Moreover, having this kind of policy will not affect your benefit entitlements, as you will still be able to claim exactly the same benefits as before.
While this may seem to some people like an expensive and unnecessary option, many policy holders feel it is good value for the peace of mind it offers in such uncertain economic times, when firms and public sector bodies are making redundancies every day. Income protection insurance offers financial security for you and your family for roughly the same per month as a satellite television subscription or a gym membership, so is potentially a very good investment for the future.