The cost of living crisis is having a major impact on our finances, but if you’re looking at ways to reduce your outgoings, think carefully before cancelling your insurance cover. Inflation is forecast to reach 10% by the end of the year, according to the Bank of England, the highest rate for 40 years, so it’s perfectly understandable to want to rein back your spending. However, if you’re tempted to cancel your life cover or other protection policies, then there are several things to consider first.
Would you have any kind of financial safety net for your loved ones without it?
Think about the reasons you originally took out insurance and the sorts of things you wanted it to cover in the event of your death or serious illness, such as mortgage payments, childcare costs, energy and other bills. Unfortunately, many of these outgoings may only have increased in recent months, which means it could be even harder for your dependants to make ends meet if you pass away or become ill and lose your income. Even if you are fortunate enough to have savings in place, rising costs mean these are unlikely to last as long as they might have previously. State support is likely to be insufficient too, so having a lump sum or regular income from an insurance policy could provide a real lifeline for your family at what’s likely to be a very difficult time.
Replacing cover in the future might not be possible
It’s worth bearing in mind that the cover you have now will have been based on your circumstances at the time you took out your policy. This means that if you cancel your insurance and want to apply again at a later date but things have changed, you may not be able to replace the cover you currently have. For example, if you’ve developed a health condition you may struggle to find replacement cover.
…Or it may be unaffordable
Even if you are able to replace the cover you’ve cancelled, your premiums are likely to cost more, as it will be based on your age at the time. The older you are when you apply, the higher your premiums are likely to be, as you’ll be considered higher risk by insurers. Remember too that there’s the risk that you may need to claim during the period you don’t have cover, but you won’t have any protection in place.
Might you be missing out on additional benefits?
If you’re thinking of cancelling your insurance because you don’t think it provides you with value for money, it’s worth getting in touch with your provider to ask whether they offer any additional benefits you might be able to benefit from. Many providers now offer policies which come with a whole range of extra benefits, often including remote access to GP and prescription services, as well as free access to physiotherapy, counselling or nutrition advice. Some even offer discounts on gym memberships or legal services and advice lines, that might even be able to provide information on budgeting and managing money. It’s therefore well worth checking whether you might be eligible for any additional benefits which make your cover better value for money.
What if I’m struggling to pay my premiums?
If you can’t afford to pay your premiums each month, get in touch with your provider as soon as possible and let them know you’re finding it difficult, rather than cancelling your policy outright. You might be able to reduce the level of cover you have so that premiums are affordable. Even though this might mean you won’t have the amount of protection you’d like, some cover is still better than no cover at all and could still provide your loved ones with valuable support. You may find that you don’t have to reduce your level of cover at all if your circumstances have changed and you’re eligible for lower premiums. For example, if you’ve stopped smoking and been nicotine-free for more than 12 months, your premiums should be lower than when you were a smoker. Similarly, if you’ve previously had to pay higher premiums due to a health condition that you’ve now recovered from, cover may now cost you less. If there aren’t ways to reduce your premiums, your insurer may be able to provide you with premium relief support temporarily to make costs more manageable. Whether you’re eligible or not will depend on your individual circumstances, but it’s well worth speaking to your provider to find out the various options that might be available to you. If you feel you really have no option but to cancel your policy, make sure you set a reminder for three or six months’ time to see if your financial circumstances have changed and you can afford to set up new cover. If you are thinking of cancelling your cover and wish to discuss your options or are looking to take cover out, please call our expert advisers on 0800 073 1932 who can discuss your needs and priorities and help you find the best cover for you.
If you are an existing L&C customer and are having difficulty paying your current premiums, email us at insurancepaymentsupport@landc.co.uk for guidance.
