PEOPLE are more likely to insure their mobile phone than their ability to earn, yet over a quarter of men and a third of women will suffer a serious illness or accident that keeps them off work for at least two months, putting them and their loved ones at risk of financial disaster.

According to Scottish Widows, one in eight UK adults has phone cover but fewer than one in 10 per cent has a critical illness policy.

With more than four out of 10 households reliant on a single income, many would be devastated if the breadwinner was incapacitated.

More than a third of those responding to the insurer’s survey said their savings would run out in three months or less, while almost as many – equivalent to more than 15 million people – admitted they did not have any savings, leaving them reliant on meagre state benefits.

Gary Burchett, protection director at Scottish Widows, said: “It’s a worrying truth that people are more likely to insure their mobile phones than their own health.

“On a societal level, we increasingly think in the short term, caring more about tangible things in our day-to-day lives. On a more fundamental level, we’re programmed not to think about the worst happening.

“Together, these are dangerous inclinations, as people aren’t thinking about insuring their health or life until it’s too late.”

According to insurer Pacific Life Re, the chance of being off work for two months or more before the age of 65 is 26 per cent for men and 37 per cent for women.

People are unwilling to think it could happen to them. Nearly half of respondents to a survey by cover provider Royal London said they believe they were unlikely to go on extended sick leave.

Almost as many thought they would not have an accident that left them unable to work and a third felt it was unlikely they would suffer long-term ill health.

Yet insurers’ body the ABI said that every year around a million people find themselves unable to work due to a serious illness or injury.

Toby Bainbridge, head of protection solutions at Royal London, said: “Sadly, it’s only when illness strikes or an accident happens that people realise how valuable the financial protection from an income protection or critical illness plan can be.”

Many people are also shunning life cover. Just 27 per cent of the population have this type of insurance, a seven-point drop on last year.

Among mortgage holders, more than four out of 10 have no cover to clear their debt, meaning their family could be made homeless if they died during the loan term.

In fact, people are far more likely to be diagnosed with a critical illness or have an injury that stops them working than to die before retirement age.

Yet seven out of 10 mortgage holders do not have critical illness cover and eight out of 10 have no income protection.

Anyone with dependents should have life insurance at least up to the value of any mortgage. Ideally, there should be enough additional cash to provide a lump sum or regular income to reduce the long-term financial loss.

For those who can afford it, critical illness insurance, which can be added to a life policy or bought separately, pays a lump sum on diagnosis of a limited range of serious conditions.

However, for most people, income protection (IP), also known as permanent health insurance, is a better investment. It makes a tax-free monthly payment to supplement savings and benefits in the event of accident, illness or unemployment.

IP covers a far wider range of conditions, can be used to meet all types of expenses and should continue until the policyholder recovers, retires or dies, although cheaper, short-term policies are available.

This type of cover should not be confused with payment protection insurance. PPI, which can cost as much or more and is notorious for mis-selling, provides less cover, as it will make only credit card, mortgage or loan repayments for a very limited period.

Royal London said the majority of those without life or health protection believe it will be too expensive, but policies start from less than £20 a month. The first step is to find out what cover your employer provides and how long it would last. Then work out how much income you would need from an additional policy to meet essential outgoings.