New research shows millions of people have been forced to borrow or cut back on long-term financial protection to cope with unexpected costs.

Data from Howden Life and Health indicates that nearly 16 million adults faced an unplanned expense of £5,000 or more in the past year, highlighting the fragility of many families’ financial resilience.

While most households were able to meet at least part of the cost using savings, a significant proportion had to rely on credit. More than a third – the equivalent of 5.6 million people – turned to loans or credit cards, rising sharply among 35- to 44-year-olds.

A further 26%, representing just over four million adults, said they had to borrow from friends or family, a figure that climbs to 45% among 18- to 24-year-olds.

FINANCIAL SHOCKS

The findings suggest that younger adults in particular are struggling to absorb financial shocks without external support, with reliance on informal borrowing far higher than other age groups.

The data also shows many households having to make substantial financial sacrifices: one in seven reduced pension contributions, while 12% resorted to remortgaging or taking a mortgage holiday to raise funds.

One of the most concerning trends identified is the decision by 16% of respondents -equivalent to 2.4 million people – to cancel or pause insurance policies such as private medical insurance, life cover or income protection to free up cash.

The proportion is higher among under-34s, highlighting the pressure on younger workers to prioritise immediate costs over long-term financial safeguards.

ESSENTIAL PROTECTION

With rising living costs and potential tax changes set to be announced in the Chancellor’s Budget, the insurer is urging households not to abandon essential protection but instead to review policies, seek advice and explore ways to reduce premiums while retaining core cover.

Jon Carroll, executive director at Howden Life & Health, said: “With rising living costs and wages failing to keep pace, it’s understandable that many people are struggling to cope with unexpected expenses.

“But it’s really worrying to see so many turning to credit, friends and family, or even cancelling their insurance to make ends meet.”

SAFETY NET

And he added: “Protection policies are there to provide a safety net when the unexpected happens – giving up that cover can leave people far more financially vulnerable in the long run.

“Advice-led decisions can make a real difference to long-term insurability and overall financial resilience.”