When everything suddenly changes – why protection matters

9th May 2022

When the COVID-19 pandemic hit in spring 2020, the dramatic rate at which everything changed left people feeling bewildered. It was yet another reminder that however much we try to make plans, we never know what’s just around the corner.

We’ve also been reminded of how precarious our finances can be when things change. The economic effects of the pandemic and the war in Ukraine have contributed to a spike in fuel, food and other prices that has sent UK inflation to a 30-year high1.

With prices predicted to continue climbing, 42% of UK adults expect their finances to further deteriorate over the next three months, according to LV=2. What this means for many households is that any rainy-day savings they have will likely be shrinking or even vanishing due to the need to cover living costs.

Something to fall back on

It can take years to build up those emergency funds, and a matter of days or weeks to deplete them. In some cases, one household crisis could empty out the rainy-day fund entirely.

“The recommended amount of savings for an emergency fund is three to six months’ expenditure, and that can act as a buffer between jobs and to see you through higher living costs,” says Harriet Shepherd, Workplace Financial Education Project Manager at St. James’s Place. “But you can’t rely on it for a long period of time.”

That means many households, whether or not they’ve been able to build up rainy-day funds, are very dependent on the income they receive to keep coming in. However, it only takes one unfortunate turn of events to put that in peril, such as an illness or accident that prevents you from being able to work, whether for a short period or over the longer term.

Almost half of UK adults surveyed by Legal & General in 2020 said that losing their income would be one of their biggest worries in the event of an illness or injury preventing them from working3.

“We often think there will be alternatives if we lose our main income, but without really considering how quickly our savings could go and how reliable those alternatives really are,” says Tanita Jamil, Head of Protection and Risk in the Development and Technical Consultancy team at SJP.

Plugging gaps

This is why protection insurance policies, such as income protection and critical illness insurance, are so invaluable. The former is designed to help cover outgoings such as mortgage repayments, rent, bills and other household essentials in the event of you being unable to work because of illness or an accident. It typically pays out between 50% and 65% of your income after a pre-agreed deferral period (usually three to six months) has passed, and most policies will do so for as long as needed.
Critical illness insurance is designed to pay out a lump sum on the diagnosis of certain specified critical illnesses or medical conditions.

Yet almost eight in ten have no income protection insurance in place, while 75% have no critical illness cover, according to the most recent Scottish Widows UK Household Finance Index.4

We’re much more likely to take out insurance on material goods, such as mobile phones and household contents, than we are to protect against the income that pays for those products, says Harriet. “Protecting yourself, your standard of living, and your health is far more valuable than protecting your material possessions. The impact of losing an income is so much greater,” she points out. “If you’re the main household earner, it  can have a huge impact on yourself and your family if you aren’t able to work.”

While the prospect isn’t a nice one to think about, having to worry about financial matters in the event of something bad happening is even worse.

“The question isn’t whether or not to get protection insurance, but whether you can afford to live without it in the event of not being able to work,” says Harriet. This is especially the case if you’re self-employed and don’t have any of the cover or benefits that an employer might provide, she adds.

“There is an element of working out what’s most important to you in terms of outgoings, and then looking at what you’re prioritising above something like protection insurance,” she says. “The main thing about protection insurance is that it gives you peace of mind.

Future proofing

There are several different types of protection insurance available, covering various potential difficulties and with a range of policy types and costs. It can be helpful to ask an expert what would be best for you and your specific circumstances.

“When people look at it, there are a lot of different products which can be overwhelming,” says Tanita. “An adviser can talk you through the different options, how they work and explain the real value of a product and how it supports you.”

Get in touch with us today to discuss the best protection options for you.


Consumer Price Inflation, UK: February 2022, Office for National Statistics, March 2022
Wealth and Wellbeing Monitor, LV=, March 2022 (Based on a survey sample size of 4,000)
Deadline to Breadline 2020: Myths and Misconceptions, Legal & General, April 2020 (Based on a survey sample size of 2,739)
Scottish Widows UK Household Finance Index, Scottish Widows, April 2022 (Based on a survey sample size of 4,500)