In addition, not only do parents fail to review their finances, but a large proportion do not have the appropriate financial products to begin with: a third (35%) of parents have no life insurance, and 72% have no insurance if they became critically ill or are unable to work. Perhaps most worryingly, the research reveals that 1 in 5 British parents (2.2million) have a mortgage without any associated life insurance, putting the family home at risk.
Additional findings from the research have revealed that after the birth of a child, only one in ten reviewed their life insurance needs and a mere quarter (26%) reviewed their requirements for critical illness insurance. This compares with 14% that reviewed their credit cards.
Nick Kirwan, Director of Protection Marketing [and father of two] said: “The emphasis for new parents at the moment is on what to do with their child trust fund voucher. But the reality is that people should undergo a full financial review following a major life event such as having a child, moving house or even changing jobs, as these will invariably affect the kind of products you need. It is worrying that parents are more likely to review their credit cards than their financial protection, but what is more concerning is the wider issue that a third of the nation’s parents have left themselves completely unprotected.”
The research also showed that the importance of having adequate cover seems to be lost on many parents; around a quarter (23%) said they did not think about reviewing their financial protection needs after the birth of their child and the same proportion said they did not see the need.
Consequently British parents are drastically underinsured when it comes to providing for their family. Only a quarter (28%) say they would be able to call on insurance products to help them survive if the main breadwinner in the family was unable to work or became critically ill, leaving 9 million who say they would have to look to the State, raid their savings or rely on handouts from family and friends to survive.
Most worryingly, a sixth of parents (17%) say that they have no idea how they would cope if the main breadwinner in the family were unable to work.
The research also revealed that parents don’t appear to be able to rely on their savings as readily as the rest of the population. Four in ten Britons (38%) say they could rely on their savings to support them if unable to work, however the expense of bringing up children means that only 31 per cent of parents say that they have any reserves to fall back on.
Nick Kirwan continued: “Financial protection is a very delicate subject and naturally no-one likes to dwell on the worst that might happen, particularly during what is a very happy time for families. However, there is a very real and pragmatic need – especially for anyone with dependents – to consider how their loved ones will be provided for should the worst happen. In particular I am astounded at how many parents have a mortgage that is unprotected – in a worst case scenario this means that families are putting the roof over their heads at risk. The cost of bringing up a child is expensive – however the costs that dependents would face during a time of need would be far greater.”
“The fact is that people simply aren’t aware that after major life events their needs will almost certainly have changed and that they need to review their finances. Advisers have a huge role to play in addressing this key issue. The broader issue for the industry is how we educate consumers on the need for protection and in addition, what steps we need to take to make protection more accessible.”
