By Stephen Ellis Last Updated: 9:51AM BST 22 Oct 2008  The revelation won't be a surprise to many households who are already tightening their belts. Mortgage approvals are at record lows and anecdotal evidence suggests that people are staying in rather than spending a night on the town.  A recession is official if the economy shows two consecutive quarters of negative growth but economists reckon that the next quarter's figures will make it a reality. Higher unemployment is also on the cards following the British Chambers of Commerce (BCC) warning that confidence has collapsed in both manufacturing and service sectors. This could see unemployment rise by 350,000 by next year, the BCC said.  But there are numerous ways you can insure against your financial situation coming under pressure.  Specifically linked to a personal loan, credit card or other credit agreement often with benefits going direct to the company providing the financial service which means payments should not affect your entitlement to social security benefits. You are covered in case you are too ill or injured to work or are made redundant. The average cost of cover sold by the company providing the credit arrangement is around £18 a month for every £100 of monthly cover. So, to cover monthly payments of £300 you would have to pay monthly premiums of £54. If you want peace of mind, by all means consider taking out cover. But taking it from the loan provider is expensive and can add thousands of pounds to your loan. Alliance & Leicester has just been fined £7m for misselling PPI. Consider opting for an independent provider such as paymentcare.co.uk or britishinsurance.com.  This will pay your mortgage for a year – sometimes two – if you are too ill or injured to work or are made redundant. Just 2.3m of the 11.7m mortgages currently outstanding are covered by this kind of insurance. Seven out of ten policies are sold by the lender and will cost over £5 a month for every £100 of cover. Buying independently will save you money. David Hollingworth, a spokesman for mortgage brokers London & Country, said: "This is often regarded as expensive cover and the take up is low."  This differs from PPI and MPPI because it is linked to your earnings and any payout is made to you direct. It can therefore be used to cover all your major outgoings from mortgages to the gas bill, although it could affect your entitlement to social security benefits. Cover – which is usually based on between 40 per cent and 60 per cent of your gross income or up to 75 per cent of your net income – is intended to pay out if you are too ill or injured to work or are made redundant. Maximum payout can be as much as £2,500 a month though some providers have a top payout of just £1,000.  This is available as a free-standing policy which will pay out between 40 per cent and 60 per cent of your gross income, if you are made redundant. Payment will be made directly to you but this could affect your entitlement to social security benefits. Where an employer offers good salary benefits if you are sick or injured, it may seem sensible to buy this free standing unemployment-only cover. However, the cost can be more than buying a policy that covers sickness and injury as well.  It is possible to have unemployment cover included in a full income protection policy. The benefit of a full policy is that cover for sickness or injury is more comprehensive and payouts need not end after one or two years. However the unemployment aspect is as restricted as it is anywhere else and will only continue for a maximum of two years.
Mervyn King, the Governor of the Bank of England has warned that Britain is    entering a recession - there will be squeeze on real take-home pay and    further house price falls ahead.