Financial & Travel Musings

Whilst the welfare state was a laudable aim back in the 1940s, trying to support those most in need when they fell sick or lost their job, that aim of support in time of need seems to have been lost in recent years.

The problem is that originally the idea was that people would obviously want to get back into work (and be able to) and wouldn’t want to remain dependent on benefits. That view clearly isn’t held by a number of people these days and these people can take advantage of the lack of limits on the help available. For example, take a typical family of two adults, two children who have become unemployed. Very roughly their entitlement would equate to £60 for the adults and £40 each for the children (neglecting, for the moment, any potential housing benefit etc.). That’s a total of £120 a week or around £6000 a year. Actually, it would be more as there’s child benefit of £35 a week so the total in basic income benefits is about £155 a week, £700 a month, £8000 a year (equivalent to a gross salary of around £12,000). Not a massive income for sure but, potentially, one that the family might live on as, of course, there would be assistance with housing costs, free school meals, and a few others.

However, consider instead a family with 10 children. Each child adds £55 a week so that’s £600/week, £2600/month or £32000 per year. Bearing in mind that the benefits are tax-free this equates to a salary of around £50,000. Even though I’m quite highly qualified, I would find it difficult to get that level of salary.

Now, I accept that people with large families don’t necessarily have them to pick up massive benefit payments but even if they don’t, surely there should be some kind of limit in terms of a maximum benefit payment regardless of other circumstances? If not, it would appear that the best plan would be to pop out kids on a regular basis: it can’t be right that the benefit system seems to be actively encouraging that.

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Insurance is one of the limited number of products that need to be sold to us rather than being a product that we’d go out and buy for ourselves.

That has the effect that insurance marketing is a little different than normal marketing. Historically it’s been very much hard-sell though successive laws and advertising restrictions have eliminated most of the more obnoxious methods that have been used in the past. Even so, it’s still quite often one of those hard-sell products.

But why is that? After all, in principle, insurance is a good idea. It’s there for those times when the unexpected happens and aims to provide you with resources that you just couldn’t rally together by yourself. Unfortunately, the hard-sell required has reduced many of those advantages and, in some cases, can even totally neglect them. Perhaps the worst example are the savings type “insurance” policies that almost everyone has bought at one time or another. Buy them after you’re around 60 or so and you’ll find that they will be quite consistent in paying you back less than you paid them, yet 60+ year olds continue to buy them.

The best example should be house insurance yet the insurance companies have introduced so many loop holes that it hardly seems worthwhile to pay it. Right now we’re finding out the hard way that the insurance company decided to radically downgrade our own house insurance policy without telling us so we’ve almost ten times the excess to pay and things that we thought were covered (and should have been covered) aren’t.

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