Time to review your personal insurances?

The cost of living continues to rise so do interest rates but salaries aren’t keeping pace.  Most of us have all gone through our finances and looked at what to get rid of. Most likely subscriptions have gone e.g. , you’ve changed broadband provider, reviewed your car and home insurance for cheaper quotes and reviewed your mortgage options.  

Firstly, please don’t panic.  It seems quite easy to type that but genuinely we all need to take stock.  The volatility of the financial markets is really a reaction to the mini-budget (which we’ve already seen u-turns on).   We also caution our clients about cancelling their life insurance, critical illness or other protection policies.  You might save on the premium but it leaves you unprotected.     

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Know your budget.

What can you afford to pay per month?  Understanding where your money is going and how best it can be used is crucial to financial wellbeing. One of our previous blogs looked at how our mental health is linked to our finances (read the blog here).

Budgeting is hard but the first steps are to know what your incoming money is and then review your bank statements for spending. The key is being honest and not being overwhelmed. It won't be easy but it's doable.

What do you need?

Insurance for the sake of insurance is a waste of money. Think about what you want to cover. For an example of E.g paying off the mortgage and other debts upon death.  We advise to consider all debts and not just the biggest one.  But do avoid the pitfall of accepting the cheapest quote you can find.  

You need to read all the fine print to understand if it will pay when you need it the most.  Also consider if you would like surviving partners and children to have a monthly stipend (monthly income?).  Bear in mind when you’re gone, your income is gone too.  How do you want your partner and family provided for?  Once you know what you need and a budget, you’ll be in a better place to make a decision.  

Don’t just cancel.

Speak to your Protection Advisor first. Once a policy is cancelled by the policy holder all cover is lost.  This could include special clauses which would pay out despite your current medical issues.  

With personal insurances the premium you pay is linked to many factors. Factors such as your age, your current health, whether you smoke or not and more. As we get older the premiums do go up. We've previously looked at the finer print of insurances in our "How much of the small print do you read?"

Cancelling all your insurances could result in a worse financial position should you be unable to work or worse.  We do stress that you have a conversation with your Protection Advisor before attempting this.

How can your monthly premium be reduced?

Yes, it can and it can also be done without reducing the core essential needs.  

• Some insurers will allow mid-term adjustments e.g. you can reduce sum assured, or the term can be reduced.
• Switch to insurance that starts with a lower premium but goes up each year. Often some policies “break-even point” with fixed premiums upwards of 5 years.
• Got a level policy (one where sum assured stays the same) to protect a mortgage that is being paid back each year i.e. mortgage going down? Consider getting a policy that decreases in line with mortgage.
• Have you and your partner got two “single” policies for a financial responsibility you share? Consider a joint policy.
• If you have income protection or family income benefit that’s great but do you really need the monthly benefit that will be paid if unable to work due to illness or accident?  We can look at reducing monthly benefit which will reduce premium. Also take a look at the waiting period (i.e. continuous time you need to be off work before insurance kicks in). Can you afford to wait longer? By increasing wait period, premium will also reduce.

All of the above will still leave you with essential cover. The uncertainty of the financial markets is worrying.  But you can take control and manage your own finances as best you can, with help from expert mortgage and protection advisors. Knowledge is everything and our best advice is to empower yourself with knowledge from reputable sources.  

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