Consumers were put on red alert last week when official figures showed the economy shrank at its fastest rate in more than 50 years.

The Office for National Statistics said gross domestic product fell 2.4% in the first quarter. It was the biggest quarterly drop since the second quarter of 1958, and worse than analysts’ predictions for a fall of 2.1%.

The news added to fears of a W-shaped recession — a small recovery followed by a renewed downturn — and more waves of job cuts across the country.

Shane Craig, at Paymentcare.co.uk, the independent loan and mortgage insurance provider, said: “The grim news will have heightened workers’ fears over job security — and how well they’d cope financially if they were made redundant.”

About 70% of British adults feel they are insufficiently covered against the financial effects of redundancy or illness, according to the 2009 Protection Review survey, compared with less than 50% last year.

More than 20m adults have no form of insurance against the loss of their income, life or health, according to Norwich Union Even those who have cover are being hit. Many people with policies designed to pay out in the event of redundancy have been startled to receive notices of premium increases of up to 70%, or significant reductions to their cover.

Here, we give our five-point guide to protecting your family:

1 Protect your income

If you are made redundant, monthly bills must still be met. Accident, sickness and unemployment cover, known as ASU, is designed to pay out a proportion of your income — at your chosen level — for 12 months, should you be out of work or unable to work.

Premiums depend on your personal circumstances, but a 30-year-old male non-smoker would pay about £20 a month.

Meanwhile, payment protection insurance (PPI) will cover only specific costs — such as the minimum repayment on your mortgage or credit card.

The number of claims has risen hugely over the past year, so some premiums have increased 30% to 50%. Some insurers have gone farther than simply raising premiums. In April, the Post Office extended the deferment period — the length of time you have to be out of work before you can claim — from 30 days to 90 days and cut the maximum monthly benefit from £2,500 to £1,500.

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