Over three million working couples are classed as 'double income, no option' (DINOs), which means they are vulnerable to financial ruin if one of the two loses their earnings. Head of Life Marketing, Justin Harper discusses how we can better safeguard those at risk.
The typical household today looks very different from the traditional image of a working family made up of one primary breadwinner and one homemaker. Instead, nowadays many households rely on two incomes to maintain their lifestyle, or even just to get by. Of the two thirds of Brits who are living as part of a couple, half (51%) are both currently working. Yet, without adequate savings or protection insurance, millions could be at risk of financial ruin if one of the main earners was unable to work for a period of time.
In fact, our latest research has found that there are 3.2 million working couples in Britain that would be classed as ‘Double Income, No Option’ households (DINOs). This means they are dependent on two incomes to make ends meet, and would struggle to cope if they lost one of their incomes.
This is particularly worrying in light of our 2017 Income Roulette report which uncovered that far too few people have the Money Helper recommended 90 days’ worth of outgoings in savings to protect themselves against a financial shock.
The lack of savings may be down to people simply not being able to afford to put money aside. A quarter (27%) of working couples surveyed say their double wage isn’t stretching as far as it did this time last year. However, not having a back-up source of money leaves them at high risk of financial difficulty if one person couldn’t work for a period of time.
The level of financial pressure is also clear in the numbers who anticipate they’ll be working for many years to come. Of couples who both work, three in five (58%) wouldn’t choose to work if they didn’t have to, while over half (54%) say the same of their partner. Three in ten (30%) people in a working couple expect that both they and their partner will have to work until retirement to make ends meet while one in five (21%) think both of them will actually need to work throughout retirement.
Millions of couples up and down the country need both incomes to pay the bills, with a significant proportion saying they’d have to make major changes if they had to rely on one income. Yet, the impact of losing an income is also not just financial. Two in five (42%) people in a couple say that if one of them couldn’t work it would strain their relationship.
Despite the reliance so many households have on both incomes, worryingly few have income protection, leaving them vulnerable if one member of the household was unable to work for a period of time. Three in five (59%) say that neither they nor their partner has any form of income protection, with 25% assuming it’s too expensive. In reality, a 40-year old non-smoker could get £1,500 a month worth of cover from as little as £18 a month. Another common reason so few people take out income protection is that they simply think “it won’t happen to me”.
As we see even more households reliant on two incomes to make ends meet, it’s important that advisers have the conversation with them about how they’d survive if they were forced to live off one income. We know that for many households, one income is used purely to pay living costs. For clients in this situation, advisers may decide that they should recommend their client takes out cover to protect this income so they would still be able to pay living costs if they couldn’t work because of illness or injury. To help advisers demonstrate to clients the likelihood of this happening, LV= has the Risk Reality Calculator that works out the possibility of someone losing their income. By making clients aware that ill health can happen to anyone, in addition to helping them understand what they have to lose, you can help protect their interests long into the future.
With so many households now relying on two salaries to get by, it has never been more important for couples to protect their joint income. We believe taking out IP is one of the best ways for people to equip themselves should they find themselves unable to work for a period of time. We want people to be confident that they’d be able to cope if they were to find themselves in such a situation. Advisers can play a key role in improving resilience and promoting IP. For DINOs, IP can be an affordable and valuable safety net that can provide much-needed boost to their financial resilience.
As a leading protection provider, we know all too well that the vast majority of people in the UK are underprepared for the impact of financial shocks, which is why we feel it is essential that the importance of financial resilience is promoted around key life events such as when taking out a mortgage. That is why we want to help as many people as possible make sure they are sufficiently equipped to withstand an expected loss of income and want the government’s new Single Financial Guidance Body to have a specific remit on financial resilience.