How to deal with an unexpected life event: Ill health and recovery

An unexpected long-term illness or accident can have a life-changing impact on your physical and emotional wellbeing, especially your ability to work.

Research from Macmillan found that ​​83% of people with a cancer diagnosis are hit financially. On average, they have to manage on about £890 less a month. Of those questioned, 33% stopped working temporarily or permanently.

With that in mind, what steps can you take now to ease any potential pressure in future?

Consider insurance

Long NHS waiting lists has meant people are thinking about their health and financial security, by considering products like income protection, life insurance, private health and travel insurance.

Research from a major protection specialist provider found that about 7% of people aged between 25 and 44 bought an income protection product in the last few months of 2020. But it’s worth remembering that most mainstream income protection insurers only cover roughly 50-66% of your gross annual income, according to Citizens Advice UK.

That could leave little to cover pension contributions, so you may want to ask insurers about an option to cover specified pension contributions if setting up an income protection plan, depending on your circumstances.

This type of additional protection could make all the difference to your ability to retire comfortably, according to Lily Bell, a financial planner: “Having a critical illness policy in addition to income protection can underpin the pension.”

Most insurance policies, however, don’t cover pre-existing conditions or let you make a claim within an initial grace period. Each policy’s period can be different, so factor that in before taking out a policy.

Plan for unexpected costs related to long-term illness and recovery

If you have a long-term illness or are recovering from an accident, you can incur unexpected costs, such as travelling to health appointments, paying prescription charges and obtaining extra childcare. So it’s worth researching what personal and financial support is available – you may be entitled to free transport to hospital for treatment, for example.

Families could also contact local support groups, who may be able to assist with free childcare. Bigger charities like Macmillan can offer grants (Opens in new window) to help those suffering from cancer with rising fuel costs.

Long-term planning, in the form of critical illness cover (which must be in place before you get ill) or income protection cover together with cash reserves can be vital, says Tom Parkes, a chartered financial planner.

He generally recommends keeping three months’ worth of expenses in hand as a bare minimum: “Very few can afford to self-insure from assets alone, so a blend of solutions, involving savings, insurance and possibly longer-term investing, can be a good idea.”

Consult financial and legal advisers

While many people recover from illnesses such as cancer or a major accident, it’s important to consider that you may not want to return to your previous workload or lifestyle afterwards.

If necessary, you could ease financial pressures by downsizing or adjusting your spending, savings and/or investing habits. Cash flow modelling with a financial adviser can help create a strategy to soften the impact of big financial changes.

Lily Bell says another step towards peace of mind can be to set up a lasting power of attorney. This can allow financial and health decisions to be made on your behalf by an adult of your choice if you're not feeling your greatest, if you're short of time while you have other priorities or if you begin to lose your mental capacity.

Making a will could also remove any doubt over your wishes when it comes to your estate. This would be one less concern for family members to contend with, especially if one is your main carer.

Should you experience one of life’s unwelcome events, knowing that you have taken steps to build up your financial security may provide some comfort. So if you haven’t started planning yet, it’s good to know there is support out there.

Whatever you decide to do, look after your money. Chase's easy-access saver account lets you start saving with as little as you like.

18+, UK residents. A Chase current account is required to open a saver account.

Related reading

• Should I buy private medical insurance?
• Returning to work after an early retirement
• How to help cope with bereavement

Disclaimer: The Hub is intended as a knowledge portal to provide information on a range of topics, including financial products and lifestyle management. These articles are not financial advice. Articles may reference products and services which Chase UK does not currently offer.