Many wrongly see their life cover premiums as unneccessary costs, the ABI said today.
Life insurance take-up is likely to be severely curtailed by the ongoing credit crunch, the Association of British Insurers (ABI) admitted today.
According to the representative body, which includes over nine in ten insurance providers in the UK, many people looking to make cutbacks in the current economic downturn will see the cover as superfluous. This comes despite a recent poll from Prudential, in which over a third of people ranked their life insurance as the protection which they "value most".
At the same time, economic conditions are becoming tougher - with inflation on the rise, the pound weakening and the credit crunch continuing to put the squeeze on consumer loan provision. Unemployment has increased by around 70,000 since the beginning of the year according to accountants KPMG, while the British Retail Consortium says that consumer spending levels are declining.
Commenting on these trends Jonathan French, spokesperson for the ABI, said: "Given that there is a credit crunch, the economic outlook is uncertain, it may well be that people look to cut back on their overall expenditure, and one of the things that they could look at to do that is their life and protection insurance.
"Of course the great irony, particularly when it comes to those products which would protect your income in the event of you being made redundant, [is that] those sort of products are at their most valuable potentially during times of economic uncertainty."
Mr French added that consumers should therefore think "very, very carefully" before cancelling the cover.
