MHA | How financially resilient are you?

How financially resilient are you?

Posted on: February 14th 2024 · read

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Financial resilience is the ability to withstand income shocks in the short and longer term. This has come to the fore over the last few years as we continue to experience and live with the consequences of the pandemic and the economic uncertainty it created.

Based upon research from Legal and General, the average working household is only 19 days from the breadline and once they have covered basic costs like rent or mortgage payments, utilities, and food, the average household has £700 left to cover everything else. This includes essential costs they may have to cover such as fuel, mobile phone contracts and broadband.

Legal and General’s research, contained in their “Deadline to Breadline 2022” report also found that,

  • The average UK household has £2,431 in savings and £610 of debt
  • 42% of employed adults believe they could only survive a month or less on their savings
  • Households underestimate the ability to handle illness or injury but overestimate the support from savings, their employer and the state.

How to become more financially resilient

One of the ways to become more financially resilient is to put in place insurance policies to protect against loss of income due to sickness, disability or critical illness, as well as ensuring upon your death, your family have access to money to support them in the future.

This article provides information of the different types of protection policies which would provide you and your family with the peace of mind knowing should the worse happen, you have a plan to deal with any unexpected events.

What is Life insurance?

Life insurance provide a simple and cost-effective way of obtaining an amount of cover over a specified term. If the life assured dies or diagnosed with a terminal illness within the term, the policy will pay out a tax-free lump sum.

There are two common types of life insurance,

  • Level life insurance provides an amount of cover which remains the same throughout the term of the policy.
  • Mortgage life insurance provides an amount of cover which decreases in line with the outstanding balance on a standard repayment mortgage.

What is Family Income Benefit?

Family income benefit is a type of life insurance for parents and families, designed to give regular monthly payments to your family if you die or become terminally ill. The policy will pay out a regular, tax-free income up until a specified date to replace your lost income.

Family income benefit is a type of life insurance for parents and families, designed to give regular monthly payments to your family if you die or become terminally ill. The policy will pay out a regular, tax-free income up until a specified date to replace your lost income.

What is Income Protection?

Income protection provides a replacement tax-free income if you are unable to work due to accident or ill health. The vast majority of providers will cover 60% of income (less any state benefits you would be entitled to). In the event of a claim the policy will pay out after a deferred period which is usually between 4 weeks up to 52 weeks.

The cover is permanent, which means cover will never be cancelled, no matter how many claims are made. The level of cover provided prior to a claim and the benefits provided following a claim can remain level or increase in line with a fixed rate or index.

What is Critical Illness Insurance?

Critical illness insurance pays a tax-free lump sum if you are diagnosed with a pre-defined critical illness during the term of the policy.

The Association of British Insurers (ABI) is responsible for protecting consumers and ensuring that it is possible to compare different critical illness policies fairly and on a like-for-like basis. They do this by making sure that insurance providers have a common format for the way they describe critical illnesses, including the use of generic terms, model wordings for the critical illnesses covered and for policy exclusions.

The monthly cost for the different types of policy explained in the article are based on your age, health position, amount of cover required and the term of the term.

How do I obtain protection advice?

It is worth noting that this article is focused primarily on protection advice which is just one aspect of Financial Planning. A holistic financial planner can also assist with, retirement planning, estate and tax planning, investments and risk management, employee benefits, cash flow management and long-term care planning.


This article should not be construed as a personalised recommendation and no action should be taken without seeking further formal advice.

MHA Moore and Smalley are authorised and regulated by the Financial Conduct Authority.

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