The combined effects of high inflation, rising costs of borrowing, and mounting energy prices (despite government intervention) mean that 2023 will be challenging for millions of UK households.
While it is natural to look for places to cut back, where – and if – you choose to do so could have a huge impact on your future financial security, and that of your loved ones.
Money Marketing recently reported that one in seven adults are considering cancelling life insurance to see them through the cost of living crisis. This could be a huge mistake.
Here’s why.
Protection policies look after your loved ones in the event of a financial emergency
Life insurance is a vital part of any long-term financial plan, especially if you have a mortgage or loved ones financially dependent on you.
Other forms of protection, like critical illness cover and income protection, are crucial too.
As well as peace of mind, they offer financial protection for you and your loved ones whatever the future holds, from death and illness to an accident or redundancy.
And yet, worryingly, figures published by Money Marketing suggest that only 3 in 10 UK adults see protection as a non-negotiable financial priority.
The survey found that one in five respondents is considering switching policies, while 1 in 10 could cancel altogether.
Persistent protection myths could be partly responsible for fuelling cancellations
Coronavirus and the cost of living crisis have forced millions of households to revisit their budget in the last couple of years.
When you’re looking for areas to cut back in the present, it can be easy to neglect your future self and underestimate the importance of pensions and insurance.
It is also possible that certain protection myths are leaving your plans vulnerable. Here are three persistent protection myths, and why they are simply not true:
1. Life insurance is too expensive
While we are quick to ensure our cars, pets, and home contents, life insurance is seen as prohibitively expensive for many.
If you have a mortgage, though, or loved ones who rely on you to pay household bills, insurance is a must.
The type of cover you opt for, the length of the term, and your individual circumstances will all play a part in determining what you pay.
So, while there is no “average” cost, it is possible to shop around to get an idea before you take the plunge.
Unbiased reports that monthly premiums for term insurance generally range from £15 to £30. You could, though, find cover from as little as £5 a month if you take out cover earlier in life, say at age 30.
2. I don’t need financial protection
Contemplating our own mortality – or picturing a future in which accident or illness prevents us from working – isn’t pleasant. But to assume that these things will never happen is dangerous too.
If you are the main breadwinner in your household, you’ll need to think carefully about what would happen to your loved ones’ ability to pay bills or a mortgage if you were no longer around.
Remember that income protection can cover your lost wages if illness prevents you from working. Decreasing term assurance meanwhile can be timed to pay off a mortgage if you die before the debt has been paid.
This protection could make a huge difference to your family if they suddenly have to cover these costs themselves, with no protection in place.
3. My plans won’t pay out anyway
Back in 2020, the Association of British Insurers (ABI) confirmed that 98.3% of protection claims were paid out during the previous year. The cost of these payouts to insurers was £5.7 billion.
While it is true that insurers won’t always pay out, the biggest reason for non-payment is the failure to disclose important information.
Many factors form the calculations providers need to perform, including your age, health, and whether you are a smoker. You might think omitting certain information will lower your premium but it could also invalidate your policy.
Be sure to disclose:
- Your genuine weekly alcohol intake
- Any medical conditions you have or test results you are awaiting
- Whether you are or have ever been, a social smoker.
Being truthful at the outset will lessen the chances of complications further down the line.
Hartsfield can help you to choose the right protection and fit it into your long-term plans
Protection can be affordable, but you also need to make sure you choose the right plan for you. You might have cover from your employer, but does it fully protect you and your family?
At Hartsfield, we can help you to look for gaps in your protection and then find ways to fill those gaps affordably.
While the cost of living crisis is making times hard for many, it is still vital that an accident, illness, redundancy, or death don’t leave your loved ones struggling to pay bills or even to keep a roof over their heads.
Get in touch
If you would like to discuss the protection you have in place, or any aspect of your long-term financial or retirement plans, please get in touch and find out how our team of expert planners can help.
Please note
Note that life insurance plans typically have no cash in value at any time and cover will cease at the end of the term. If premiums stop, then cover will lapse.