The cost of living crisis has hit many aspects of people's lives, including their ability to afford life insurance. With rising inflation and stagnant wages, many are finding it increasingly difficult to cover basic living expenses, let alone invest in protection.
We'll look at how life insurance has been impacted, and what you can do to cut back on costs.
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What do we mean by 'cost-of-living crisis'?
In the UK, the cost of living crisis refers to the situation where the price of essential goods and services is rising faster than people's incomes. This has seen the biggest rise in living costs for 40 years.
According to the Office for National Statistics, in October 2022, inflation reached its highest point at 9.6%. As of December 2023, it remains at 4.2%.
This increase in inflation has led to a rise in the cost of almost everything. Many individuals and families have been left struggling to afford necessities such as housing, food, and energy costs.
So how has this affected life insurance?
Cancellations
As people look to cut costs in every area of their lives, life insurance has seen an increase in cancellations. According to a survey conducted by Consumer Intelligence in November 2022, just over 30% of the 1,096 respondents said they had cancelled their life insurance.
With limited disposable income, individuals and families may look to put immediate needs for protection.
Rising premiums
In addition to cancellations, the cost of living crisis has also affected life insurance through rising premiums. Insurers base premiums on various factors, including the risk of insuring an individual. With the current economic climate, these risks have increased, leading to higher premium costs.
If you are facing financial difficulty, please contact your insurer before cancelling your policy or letting it lapse. They may have options available, which means you don't have to lose the plan.
Searching for cheaper options
With rising premiums, many people are seeking out cheaper life insurance options to help alleviate the financial strain. Returning to the survey by Consumer Intelligence, over 20% of respondents said they had switched policies.
This has allowed people to maintain some level of financial protection while also managing their budgets.
Reduced cover
As premiums rise, some may choose to reduce their cover or opt for lower benefit amounts.
This means that they may not be adequately protected in the event of their death, which can have significant implications for their family/loved ones. For example, if your cover is reduced, your family/loved one’s may receive a smaller payout upon your death.
Reluctancy to take out cover
The impact on the cost of living has also led to a reluctance among people to take out life insurance cover. With increasing financial pressures, some may see life insurance as an additional expense that they simply cannot afford.
Many individuals are already struggling to make ends meet, let alone thinking about future protection. Life insurance is often seen as an extra cost that can be cut out of their budget.
Is there anything else we can help with?
How can I cut back?
If you are struggling to afford life insurance, there are steps you can take to cut back on costs:
1. Cut costs in other areas: This could involve making small sacrifices such as cutting back on eating out or cancelling subscriptions. You could also consider negotiating bills or switching to cheaper alternatives for certain services like TV or broadband.
2. Assess your needs: Take a closer look at your current policy and see if it still aligns with your current/future needs. You may find that you have more cover than necessary or that you can adjust your policy to reduce premiums.
3. Shop around: Take the time to compare different insurers and policies to find the best value for your budget. Look for insurers that offer competitive rates, but will also provide the cover you need. Consider factors such as the company's financial stability and customer reviews.
4. Consider a joint policy: If you have a partner or spouse, you may be able to save money by getting joint life insurance. This may be more cost-effective than having two separate policies.
5. Improve your health: Insurers take into account factors such as age, health, and lifestyle when determining premiums. By adopting a healthier lifestyle, you may be able to lower your premiums.
At Cavendish Online, when you buy with one of our advisers, we’ll automatically place you on an annual review scheme. We’ll get in touch every year to check that your policy is still adequate, and look into alternatives if not.
Should I keep my life insurance?
While it's natural to want to reduce spending, cancelling your life insurance policy can create problems down the line, such as:
You could pay more for cover in the future
If you cancel your policy now and decide to get cover later, you'll have to once again go through the quotes process. If some time has passed you may face higher premiums due to factors like age or health conditions. In this case, it may be worth keeping the policy.
Your family/loved ones will be unprotected
Without cover, your family/loved ones may not have the financial support they need if you were to pass away. By cancelling your policy, you are potentially putting your family at risk of financial hardship.
You won't get a refund
If you cancel your life insurance policy, you will not receive a refund for the premiums you have already paid. They are only refundable if you cancel within 30 days of the policy start date.
If you have dependents who rely on your income, keeping your life insurance is recommended. Even if it means adjusting other expenses or finding a more affordable policy, having some level of cover can provide peace of mind and financial security.
What if I can't pay my premiums?
If you find yourself unable to pay your insurance premiums, it is better to act sooner rather than later.
The first step is to contact your insurer. They may have options available to help you keep your cover, such as a grace period or a payment plan.
During this conversation, be honest about your financial situation and explain why you are unable to make the payments. Your insurer may be willing to work with you and find a solution that allows you to maintain your cover.
Are you in need of life insurance?
At Cavendish Online, we understand the importance of finding the affordable life insurance cover. That's why we offer a convenient and hassle-free way to compare cover rates from leading providers, ensuring that you get the best deal. Simply enter your details, and we'll provide you with a personalised quote.
If you have a pre-existing medical condition, a dangerous hobby or job, or simply want some additional assistance, our team of advisers can help. Speak to an adviser today to get the support you need.
Speak to the experts...
Give our advisers a call today.
Our team of friendly and professional advisers are on hand to help with any questions you may have regarding Life Insurance.
The advisers can also make recommendations tailored to your current situation and will research the market on your behalf, ensuring you secure the cover you need and supporting you every step of the way.
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