Money Watch – Personal Finance Blog

According to a recent survey, up to 5 million Britons are planning to cut back on insurance in order to reduce their outgoings.

The main victims? Home and car insurance. 

Home Insurance

When it comes to home insurance, there are things such as flood cover which you may feel it is unnecessary to keep on your policy. But cutting this might only save you a couple of per cent off the monthly premium, whereas the average claim in the event of a flood is apparently £17k.

Of course, if you live in an area which is categorised as being a high risk of flooding, the saving you make is likely to be greater, but then of course so are the chances of you coming down one morning and finding your dishwasher floating about in your kitchen, whilst your goldfish enjoy their moment of freedom.

There are other ways of cutting the cost of home & contents insurance, although these might mean paying out in the short-term for a long term benefit. For example, if you don’t have a burglar alarm, it may pay to get one fitted. Getting BSI approved locks fitted can also shave a couple of per cent off your premium.

You should definitely be wary of stopping your home insurance completely, as being covered could be a condition of your mortgage.

Car Insurance

As for car insurance, it is of course illegal to drive without the necessary cover, and it’s getting easier easier for the police to identify and spot uninsured drivers. But many drivers are now considering “cheaper” 3rd party deals, where a payout is only  made to cover the damage to other people or their cars. 

What many don’t realise though is that third-party cover isn’t necessarily much cheaper than comprehensive cover – premiums are largely based on the likelihood of us having an accident, rather than the cost of repairing or replacing your car. You could end up paying more in the long run if you have to pay for your car to be repaired.

Life Insurance

There are other insurances that people may be considering cutting – life insurance comes to mind as the sort of policy people might think about cutting without really contemplating the consequences. 

There is already a massive insurance shortfall when it comes to life insurance, so it’s worrying to think that people might be thinking of completely cutting this important cover. 

Of course, life insurance is not essential for everyone, but if you do have a life insurance policy and you’re thinking of stopping it, I’d urge you to seriously reconsider it. Not only would you be leaving your family unprotected in the event something should happen to you (if that’s what you’ve got the cover for), but you might find it more expensive to take out cover in the future, as you will be that bit older, and age is a big factor in the premiums. 

Whilst cutting the cover completely is probably a no-no, you could consider seeing if you can get the same life insurance cover cheaper – premiums have come down over the past few years, so if you took your cover out four or five years ago you might be able to get a cheaper policy. However, make sure you’re comparing “like with like” when it comes to what exactly is covered, and don’t cancel any existing life insurance until you’re certain (ie. you have written confirmation) that your new policy is in force.

With all insurance, there is no cost for shopping around to see if you can get the same deal cheaper (again, I’d emphasise the need to compare like-with-like to ensure you’re getting the same cover), so get yourself onto the comparison sites before stopping that direct debit.

Are you one of the 5 million who has considered or even cut back on your insurance to reduce your outgoings? How did you justify cutting the cover? Let us know in the comments below.

photo credit: Jeff Karpala