Cutting costs? Think twice before cutting your life insurance

With the prospect of spending and job cuts on the horizon, many people will be reviewing their finances at the moment and looking at ways to cut their costs and outgoings.

Decent savings can potentially be made on things like your mortgage, utilities and mobile phone and sometimes one or two of life’s little luxuries need to be sacrificed.  However, it’s often life insurance that many people feel they could do without and L&C is urging people to think twice before cancelling any protection policies in a bid to help their budget.

The dangers of cancelling insurance policies were highlighted last weekend in an article in the Mail on Sunday.  It told the story of Alan Jacobs who was diagnosed with testicular cancer a year ago.  After a tough period, Alan has now won his battle against cancer and is back at work.  Not only that, but he was also able to claim a £130,000 payout from his critical illness policy – even though he had forgotten that he had the policy in place.

This payout has allowed Alan and his wife to pay off a big chunk of their mortgage and put some more money aside in a trust fund for their young son.

According to research from the insurer Scottish Provident, about a third of Britons (31%) do not have any form of emergency financial provisions in place to cover them should they or the main breadwinner die or be diagnosed with a serious illness or disability.  What’s more, 58 per cent of adults have no protection insurance at all – no critical illness cover, no life insurance or any insurance to safeguard their income if they were unable to work due to illness, injury or unemployment.

In the article, Kevin Carr, from Protection Review, said that a lot of people who’ve previously taken out cover are cancelling policies at the moment, adding that, “it’s an unfortunate consequence of the hard times we live in.”

If you’re going through your finances at the moment and looking to make some budget cuts of your own, think twice before cancelling any protection policies you may have.  It may appear like a simple way to save some money each month, but it could leave you and your family with no financial safety net to rely on in difficult times.

Also, remember that life insurance gets more expensive as you get older so you’re likely to have to pay more to replace the cover in the future.

Depending on how long you’ve had your cover and who it’s with, you may be able to save money by switching to a policy with more competitive premiums.  Try our 1 minute life insurance check to see if we think we could save you money.  If you are switching, make sure you don’t cancel your existing policy before a new one is in place.

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