As the recession continues to affect family finances, more households are trimming back on their insurance cover in a bid to save money and make ends meet. The danger, however, is that money-saving short term could prove very costly in the long term.
A recent survey conducted by Uswitch discovered that one in five UK households are not protected by home contents insurance. According to its findings, nearly half of those involved blame the current economic climate deeming insurance to be a luxury they can ill-afford at present. With recent crime figures revealing domestic burglaries to be on the up, consumers are running the gauntlet by putting themselves increasingly at risk as a result.
It's a requirement for car owners to have at least third party motor insurance. It's tempting not to bother with insurance, but would be a false saving. If your caught you're in for a £200 fine, six points on your license, and your car being impounded. Add all this up and your now longer saving money.
Motor and home insurance shouldn't really be considered as ‘extras'. While building insurance is often a condition imposed by mortgage providers, leaving yourself open to being underinsured could end up costing you more in the event of a problem than the cost of the cover.
Another area where consumers may be tempted to cut back is on travel insurance but once again, this could be an unwise move. Travellers may look to make a saving by going on holiday uninsured, but if you need medical treatment abroad, the costs can be huge. If you're seriously ill, getting home in an air ambulance could cost £50,000, so it is strongly recommended to take out cover.
One simple way of reducing the amount you pay on insurance policies is making sure you do not double up on cover.
Findings from insurer Esure show that nearly a quarter of us buy additional insurance to cover the loss, damage or theft of a new watch, piece of jewellery or mobile phone, despite being covered under home contents insurance.
Nonetheless, while standalone policies, such as mobile phone insurance may be among the first things to go when you have less disposable cash, you do need to think carefully about which types of insurance you need in a downturn.
One area you can't afford to cut back on in the current climate is income protection - if you are unfortunate enough to have an accident, fall ill, or lose your job, you are going to need cash to cover loss of earnings.
Therefore, before reducing or cancelling any of your policies, make sure you have thought through the implications should the worst happen. While it may be tempting to cut back on your insurance cover, consumers should be careful not to compromise. You must remember that the cost of not having the right cover can hugely outweigh any savings.
