Struggling savers eager to cut back on insurance coverage

In anticipation of rising unemployment and strained personal savings, consumers have begun cutting spending at all costs – even at the sake of their existing insurance policies.

A recent study by insurer LV= suggests that policyholders are reducing or dropping their current insurance coverage in order to cut back spending and save money in time for the recession.  Over one million policyholders have already reduced their insurance coverage, while another five million expect to do so in the next 12 months. 

According to the study, people are most likely to cut back on the coverage of their home insurance.  Approximately 44% of poll respondents said that they planned on reducing their home insurance coverage, followed by 37% on car insurance, 22% on travel insurance, and 18% on pet insurance.

Insurance providers have been quick to stress the potentially serious and costly consequences of reducing the scope of coverage of an existing insurance plan.  John O’Roarke, managing director at LV=, said,

“It’s understandable that people are looking to ways in which they reduce their outgoings, but cancelling or reducing essential insurance cover could result in many people finding themselves seriously out of pocket if something untoward happens. It is at time likes these, when money is short, that insurance becomes evermore important.”*

If you are struggling to meet insurance payments, you might consider several options before deciding to drop or cut back on an existing plan.

- Assess your individual needs carefully.  Your relative level of risks for any insurance plan will be unique to factors such as age, location, and extenuating circumstance.
- Think realistically about your comfort with these risks – and the security that an insurance plan might be able to afford you and your family.  There is a fine line between an insurance plan that covers more than you need and one that skimps on the essentials.
- Avoid hasty decisions influenced by financial constraints.  You might consider ‘sleeping on it’ in order to settle on an insurance plan that strikes an appropriate balance between personal security and financial cost.
- Make sure that you have the best insurance plan for your specific needs.  Before speaking to an independent insurance expert, use an online insurance comparison tool so that you have a clear idea of your available options.
- If you are still having a difficult time affording the insurance plan that works best for you, you might consider increasing your excesses in order to decrease your premiums.

  *Source: http://timesonline.co.uk/money