Families afraid of being laid off offered low-cost income insurance as an alternative to savings

Unemployment in the UK rose by 128,000 to 2.64 million in the three months to October. This is the highest figure since 1994. The Office for National Statistics (ONS) released this on December 14, 2011, confirming that the unemployment rate had increased from 7.9% in the previous quarter to 8.3%. Employees are beginning to wonder if their employer will be the next to downsize and what they can do to protect themselves and their loved ones.

With the crisis in the Eurozone still raging and there is now (even) an economic slowdown in China, the cold hand of uncertainty is reaching the global economy. As a result, few companies in the UK are investing in new staff and additional capacity. They have every reason to expect demand to remain flat, if not drop dramatically in the event that the euro’s troubles trigger a severe double recession. Major job losses in both the retail and travel sectors are fueling the growing number of jobs in the UK. UK consumers, pressured by inflation reaching the essentials and paying higher taxes, are cutting back on spending. The main street is hit hard.

Without improving the outlook for the private sector and accelerating job losses in the public sector, layoffs can only increase. It is very certain that the time it takes for people to find other work after being laid off will increase as more people look for fewer jobs.

For anyone who has not saved much and loses their job, it is indeed very difficult to survive for a long period of time without a wage coming in. In addition, seizures are now increasing, according to the Council of Mortgage Lenders. Many more people will find their home in jeopardy if the lender’s patience runs out. That’s why it’s never been more important for individuals to have money to fall back on to pay their critical bills when they’re out of work. Especially for families, if the ‘breadwinner’ is laid off and they have little savings, they urgently need financial help to keep a roof over their heads.

It is the risk of layoffs for people currently in steady employment and the need to keep money flowing to their households that income protection insurance is designed for. This product is also referred to as Lifestyle Protection Insurance by a major Building Society and other specialist providers. This type of financial protection insurance pays out for a maximum of one year (some cover 2 years) if the policyholder is incapacitated for work due to an accident, illness or unemployment.

The buyer chooses the monthly payment he wants to receive. It is usually limited to between 50 percent and 70 percent of their gross pay (that is, pay before income tax or national insurance). Therefore, it may not provide as much money per month for most people as it would when they were working, but it is enough to pay their bills and stretch even limited savings much further. Buyers of these products usually opt for a monthly benefit of around £1,000 as they are also eligible for government benefits or perhaps have a partner who can share the financial burden in their job search.

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Also remember that this coverage pays the same monthly benefit if the policyholder is unable to work for medical reasons. Some people can suffer greatly in terms of their mental health after being laid off, searching for another job for months and getting repeated rejections can lead to clinical depression. That is why, in addition to coverage for unemployment, the illness part of this short-term Income Insurance can also be a financial lifesaver.

There are a large number of families in the UK who are financially vulnerable, with monthly budgets stretched to the limit. For them, it is simply impossible to save a sensible amount to cushion the blow of unemployment. However, they may be able to find the equivalent of £5 to £10 a week to pay for income protection insurance. Otherwise, they would be extremely vulnerable to a break in their employment lasting more than a month or two. Compared to the cost of paying back day loans or the financial penalties of debt restructuring, short-term income insurance offers a very low-cost alternative.