Braintree, Essex (PRWEB) July 1, 2009
News this week that two thirds of workers have not saved enough to manage their debts if they lost their jobs is a scary situation to be in, but it can easily be remedied by taking out a Payment Protection Insurance (http://www.burgesses.com) policy says PPI lobbyist Sara-Ann Burgess from specialist firm Burgesses.
Research recently undertaken by insolvency specialists MCR reveals 70% of workers only have enough money to last between a week and two months in the event of redundancy and 23% would have no idea how to manage their debts if their income went.
"These are staggering statistics," opines Sara-Ann, "and clearly underlines the important role PPI policies have to play in these recession-hit times. PPI is the only mechanism that provides a cash boost to people who have been unable to stash away funds to meet future debts."
The policy kicks-in if the claimant loses an income due to accident, sickness or unemployment and monthly premiums are priced dependent on the amount of benefit the policyholder is looking to receive. Tax free payments can be made for up to a year and cover is available specifically to meet mortgage, loan or credit card monthly repayment costs or to pay a wider range of bills such as rent, utility, council tax and food.
Despite its benefits, very few people opt to take out and claim on this cover. According to the Association of British Insurers there were 33,895 people claiming on the unemployment section of their policy in February this year. Given unemployment reached 2.2million earlier this month, Sara-Ann suggests more people should pay into a product that will prop them up financially when hard times strike.
She continues: "Around 1.5% of the unemployed are relying on PPI for an 'income', ahead of their savings, if they have any. This is pitifully low and I urge anyone worried about their financial situation and job security to consider this cover as an option."
Surprisingly, MCR found that only 14% of respondents in its You Gov survey were concerned about losing their job, despite predictions from the Centre for Economics and Business Research that 334,000 jobs from the business services sector alone will go in the next five years. MCR did, however, find that more workers are taking steps to get prepared for a job loss - 64% professed to be changing their spending habits in a bid to better manage their debts. But the consultancy, along with Sara-Ann believe these actions are 'too little, too late'.
She comments: "Any attempt to save funds for the future must be applauded, but in order to meet bill commitments for three months or so, most people would need thousands of pounds to cover the mortgage or rent, utility, tax, food etc. This means saving over a prolonged period of time, which for many is unachievable."
Sara-Ann has for years called for lenders to lower their costs and make these policies more easily accessible to all, but instead they have increased their premiums and restricted unemployment cover to certain sectors. But Sara-Ann remains optimistic that independent PPI providers will continue to offer policies at competitive prices and provide cover for those looking for unemployment cover only.
She concludes: "Firms such as British Insurance charge £3.40 per £100 of benefit for unemployment cover, so a person paying £17 a month in premiums would receive £500 a month for up to a year. There are mechanisms out there to help people manage their finances when redundancy occurs and they do this without eating into any savings. After all, why should people lose their savings when there's a low cost alternative that will keep those funds intact and still pay the bills? A monthly PPI policy costs less than a monthly digital tv subscription package or a take-away for a family of four."