All offset mortgage borrowers should consider forms of income protection – if they do not have then their mortgage, their credit rating and their home could all be at risk.

The problem is that too many Britons underestimate how long they could survive without income – almost half believe they could last 10 months if faced with the prospect of not working – the reality is they could survive just five months, according to Bright Grey.

The insurer says that 38% of the UK’s working population could not survive beyond one month on savings alone. These people, if faced with unemployment would quickly amass debts and may face repossession and bankruptcy.

Bright Grey also found that Britons believe their average outgoings to be £892 per month, when in fact they’re spending £486 more than this at £1378 per month.

Roger Edwards, proposition director at Bright Grey says: “It’s clear that Brits are ill informed when it comes to their finances. Not only are they grossly overestimating how long they could survive if they lost their income stream, but even more worrying is that they have no real concept of what they’re spending each month, making it very difficult to budget and plan effectively.

“When it comes to financial planning, most people seem to have the blinkers firmly in place. However, if they start to pull together a realistic plan now they could save themselves a lot of heartache in the future.”

Nearly three in 10 people said they would ask creditors for help if they were unable to pay their bills and a further 13% would rely on credit and loans. This is dangerous behaviour – not only are many people turned down for credit, but short-term unsecured debt will only lead to more problems in the long-run.

It is foolhardy to get some sort of income protection insurance, especially in this climate. Savings, charity and state support cannot last forever – but with the right cover that pays out just what you need each month, you can concentrate on getting back to work, safe in the knowledge that your home is safe.

SOURCE: Bright Grey, 01/12/09

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