Can you afford your insurance cover?

Over the years consumers have taken out many different types of insurance cover to protect them against certain situations and circumstances. The insurance cover industry has enjoyed a lot of business for many years, with people taking out all sorts of cover from Halifax home insurance, contents insurance to pet insurance, medical insurance, dental insurance, vehicle insurance, income insurance, payment protection insurance, life insurance, critical illness insurance, and more.

However, all of these insurance policies cost money, and this is something that has created something of an issue over recent months. In the past households have managed to budget for the various insurance policies that they have needed in order to enjoy peace of mind and protect themselves and their loved ones. However, over recent months the financial situation has changed for many households, and increased costs have resulted in many having to find ways of cutting back on their outgoings.

Households have looked at a variety of ways to cut back on their monthly outgoings in order to weather the increased costs such as higher energy bills, rocketing petrol prices, increased food inflation, and higher borrowing costs. It seems that one of the ways in which consumers are looking to cut back on their outgoings is by looking more closely at their insurance policies to see which ones they can cut back on and which they can cancel altogether.

Officials have stated that this situation means that the insurance industry could suffer huge losses amounting to £1.5 billion, with people either reducing their cover or cancelling altogether. A survey was carried out by Deloitte, and this showed that over a quarter of consumers – around 26% – are looking to reduce the amount of money that they spend on insurance cover over the coming twelve months, which spells bad news for the insurance industry.

Motor insurance has gone up in cost over recent months, and around 18% of consumers are looking to downgrade their vehicle insurance cover to a lower level, which will work out cheaper in terms of premiums. Around 26% of consumers said that they would be looking to either reduce or cancel their payment protection insurance cover over the coming twelve months too, and it is thought that the PPI industry will really suffer as a result of lack of affordability amongst consumers.

One insurance industry professional said that whilst he understood the thinking behind consumers’ actions in reducing or cancelling cover it was also important for consumers to think carefully about the repercussions of cancelling certain insurance policies, as they could suffer financially in the longer term.

He said: ‘At a time when households have less disposable income, it is understandable that many will look at how they can reduce their spending. However, consumers should think carefully about which types of insurance they most need in a downturn. A short-term saving could cost a lot should an accident occur and adequate insurance cover isn’t maintained.’