The pre-budget gamble unveiled by Chancellor Alistair Darling means that millions of middle and higher earners in Britain will be financially worse off as a result of  the changes to tax and national insurance.

Brits are reportedly panicking as many are worried about being able to maintain their expenditure during this credit crunch. This has left many Brits ignoring financial safety nets including life insurance, income protection and critical illness cover.

Many Brits also have no knowledge of benefits that they are entitled to and others simply do not get sick pay, death in service or health insurance. An estimated 81 per cent of people also do not know what they should claim from the government in benefits should they fall too ill to work.

Demand for life cover drops

Consumers now appear more willing to neglect life insurance than ever before. At the same time, life insurers such as Standard Life have recorded a decline in their domestic market sales. This has forced a shift in concern from the impact of the financial crisis on insurers' balance sheets to the effect it has on demand for life insurance products.

Reports show that the former mutual had its sales of UK life and pensions drop 5 per cent from £10.26bn to £9.79bn in the nine months to September 30. In the third quarter, UK life sales fell 14 per cent to £2.63bn.

But the credit crisis and the continuing market jittery has also forced the over 50s to consider retiring abroad. A recent study by RIAS found that more than 400,000 would-be retirees are seriously considering relocating abroad once their working lives come to an end.

Worryingly, there is more bad news for the market as figures from Barclays Financial Planning suggest that 47 per cent of UK adults do not have protection policies and as such have left their families vulnerable should they lose their income, health issues or even death.

Thousands without a safety net gap

Barclays Financial Planning says that 52 per cent have no life insurance while an estimated 75 per cent do not have critical illness cover.

Alison Tattersall, Head of Customer and Proposition at Barclays Financial Planning said: “When finances are tight it is often responsibilities like protection policies that fall to a lower priority, and of course these policies protect outcomes that people don't want to think about.

“But people must consider the financial consequences of what would happen if they were unable to work, or their dependents' situation if they died, it would be far worse than any concerns they currently have over struggling to meet their outgoings.”

Those aged between 35 and 54 often have the most responsibilities in terms of dependants and outgoings, but showed a large gap in their protection cover, with 45 per cent having no life cover and 74 per cent with no income protection insurance.

However, the study found that when it comes to what other safety nets people could be relying on, 60 per cent of respondents said they had no savings at all, had no knowledge of what they have in savings or that they were saving less than one month's salary in the bank.