The cost of illness: how being ill or injured could deplete your wealth

18 March 2024

While you may think that a serious illness or injury is a remote possibility, the reality is that they are far more common than you may believe. In fact, the NHS reveals that it sees around 1.3 million people each day, the equivalent of the entire population of Estonia!

Aside from the physical and mental toll a severe illness may present, it’s also important to consider the financial implications, especially if you couldn’t work while you were recovering.

For example, a Macmillan survey reported by Aviva shows that 83% of people with cancer in the UK face average costs of £891 a month on top of their usual outgoings. In this instance, you could very quickly deplete your savings and place your long-term financial plan under strain.

Continue reading to learn how being ill or injured could weaken your long-term financial security, as well as two options that could help you protect your wealth in the face of an unexpected event.

Cases of serious illness are increasing, but many people still believe it “won’t happen to me”

Understandably, as you progress through life, you may not want to consider the possibility of being diagnosed with a serious illness.

Interestingly, Aviva says that 59% of people they questioned “live life how they want and hope that cancer won’t happen to them”, while 20% were potentially putting their health at risk while not doing anything to reduce their chances of developing cancer and other serious illnesses.

However, Macmillan Cancer Support reveals that around 393,000 people in the UK are diagnosed with cancer each year, roughly one every 90 seconds. Additionally, the Stroke Association states that 100,000 people have strokes every year in the UK, equating to one every five minutes.

While you may initially only think about the physical and emotional effects a sudden life-changing illness or injury would have, it’s also essential to consider the financial ramifications.

Reduced income for a significant amount of time could weaken your financial security

As well as facing the difficulties that come with a period of ill health, a serious illness may also present financial challenges.

As you read earlier, Macmillan research reveals that 83% of those with cancer are around £891 worse off each month after their diagnosis.

On top of this, if you’re too ill to work, the loss of income could place further financial strain on you and your loved ones. In Macmillan’s Hidden Price Tag report, only 17% of respondents reported “no loss of income” due to their diagnosis.

If your regular expenditure rises and you’ve lost income due to a serious accident or illness, you may deplete your existing cash savings simply to meet your regular commitments. Similarly, you may feel the need to cash in a portion of your investment portfolio to free up some money to help you to maintain your lifestyle.

Even if you have an emergency fund, it may only cover your expenses for a brief period of time. And, if you’re employed, any sick pay you receive may be time-limited, while Statutory Sick Pay (SSP) is just £116.75 a week, paid for up to 28 weeks.

As well as affecting your immediate financial situation, reduced income may mean you also pause or stop your regular savings or pension contributions. This could then have a knock-on effect on your later life, meaning you have to retire later or compromise your standard of living later on.

2 helpful ways you could protect your wealth against illness or injury

Thankfully, there are several ways to protect yourself and your loved ones’ financial security in the event of a severe illness or injury – read on to discover two of these measures.

Income protection

If you need to take time off work due to illness or injury, income protection can act as an invaluable safety net.

Indeed, this form of protection pays you a monthly sum until you can return to work, or the end of your protection period.

After an “excess period”, which is the time you must be off work for your cover to kick in, income protection will typically start paying out up to around 60% of your income.

The payments that income protection provides could help you ride out periods that you’re unable to work, without having to dip into your savings to pay for any essential expenses.

It could be particularly practical if you’re self-employed and wouldn’t be able to earn anything during your period of recovery.

Critical illness cover

When you’re recovering from a serious illness or injury, there’s a good chance money worries are the last thing you want while you focus on your recovery.

Critical illness cover can provide much-needed financial support so you can focus on getting better.

This valuable form of protection pays you a tax-free lump sum if you’re diagnosed with, or need treatment for, one of a list of serious illnesses. You could then use this payout to repay your mortgage or other debts, modify your home if you have a disability, or even maintain your standard of living if you need to take time off work.

This could give you peace of mind, knowing that if the unexpected occurs, your finances will be one less thing to worry about.

Get in touch

If you’re still concerned that your finances wouldn’t be able to withstand a sudden shock, such as an illness or injury, we could help you secure some peace of mind.

Email info@depledgeswm.com or call 0161 8080200 to find out more.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

Life Assurance plans typically have no cash in value at any time and cover will cease at the end of term. If premiums stop, then cover will lapse.

Cover is subject to terms and conditions and may have exclusions. Definitions of illnesses vary from product provider and will be explained within the policy documentation.