We discuss why, even in the current economic climate, some kinds of insurance are still indispensable.
With times as tight as they are, and people in the UK looking to cut back on costs any way they can, it’s little wonder that insurance cover is one of the first things many are looking to reduce. It’s tempting to go as far as abandoning some insurance altogether in the quest to trim down our expenses. However, it is important to assess your individual situation and your current policies carefully before making a decision regarding cancelling or reducing insurance cover.
Why insure?
Insurance exists for a reason; to provide back-up and create a stable financial foundation for you and for your financial dependants should the worst happen. Consequently you can’t afford not to insure things that are vital to your own and your family's financial security.
By their very nature, worst-case scenarios such as becoming ill on holiday or the sudden medical emergency of a pet can happen unexpectedly. Often the most unfortunate circumstances can occur when we least expect and when we are least prepared for them; which is why insurance for vital things in our lives is so important.
Clearly some insurance policies will be unnecessary to your individual circumstances, or just too costly to be worth keeping. But though it is wise to be aware of some insurers' tendencies to prey on fear or to fail to keep the price of their policies competitive, it is worth bearing in mind that for the most part insurance is a fairly-priced, valuable financial commodity.
What insurance should I keep?
As a general guideline you should always judge by your own individual circumstances when it comes to assessing the worth of your insurance policies. The necessity of life insurance is something none of us want to think about; but if you have family or other dependants who rely on your financial support, it's imperative that your life is insured. On the other hand it will be lower down your list of priorities if you don’t have financial dependants or if you are, for example, one half of a two-income household.
When taking out home insurance it’s important to properly assess the value of the contents of your household. Many people make the mistake of vastly under- or over-estimating the value of their possessions and consequently have a policy that isn’t suitable for the kind of cover they really need. Another thing to take into account is what you are likely to need cover for. Many people are cutting down on flood risk cover for example; a sensible option if you know your house is unlikely to flood, but a ticket to disaster if your home is, like so many in the UK over recent years, particularly susceptible to such an event.
It may be tempting to cut back on the cost of car insurance cover to save money, but remember that this is a legal requirement in the UK. The cost of a fine should you be found driving without motor insurance, not to mention the possibility that your vehicle could be seized and crushed, will far outweigh the cost of keeping up minimum cover.
When it comes to travel insurance there is a little more room for manoeuvring. Check your existing life policies, and health policies if you have them, to see if they cover any kind of incidents you might encounter during travel. Your current insurance may well cover what you need which eliminates the extra cost of taking out a new policy. If you don’t have any cover for travel, it’s worth contemplating how much basic travel insurance will cost you versus what the damage will be to your wallet if you find yourself in dire circumstances. Usually the former will more than justify the cost of the latter.
What it comes down to is weighing up how much financial hardship you or your dependants will be caused if the imagined worst-case scenario becomes a reality. The more financial hardship that is likely to be experienced by losses or damages incurred, the more necessary it is to purchase insurance for that area of your daily living; be it travel, home, life, and so on.
Take the time to evaluate your specific financial circumstances, and figure out how much you need to save versus what types of insurance you can’t afford to lose. Then make sure that the insurance you already have and purchase in the future is the best deal for you, and provides you strictly with the cover you need.
