Don't cancel those Insurances (From Halesowen News)

Don't cancel those Insurances

7:00am Saturday 18th October 2008

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In the current climate that we are going through, many of us will be looking at cutting back on our monthly outgoings, to save a little here and there, just to make ends meet.

One of the obvious things we look at cancelling is any old amount on our bank statement that we don't seem to be getting any benefit from. Insurances are one of those things, well some insurance!

We all know that to drive our cars we must have car insurance and we all have to have at least Buildings insurance if we own our own properties, but the "non-compulsory" ones surely could go and then perhaps we could re-new them if things get better? Or should we?

Let's just think about the insurances that we are most likely to cancel- Life, Critical illness and Accident, Sickness and Unemployment policies fall in to this category. Would they be ok to cancel, just for a while? If we think about the circumstances when we usually buy these policies and the reasons for buying them in the first place, we will see why we should keep these policies and perhaps think of cancelling an un-used gym membership or down grade the sky subscription instead.

When you buy your first property, if you have had a good adviser help you through this minefield, they will usually set you up with life and critical illness insurance and probably either accident, sickness and unemployment cover or the better income protection cover, although this may be expensive. They should have explained at the time the reasons for doing these, but for those of you who have forgotten lets look at them again : Basic Life Cover- this policy covers the possibility of you dying and when taken with a new mortgage is either just to cover the mortgage amount, so that it will be paid off, or if you are prudent, will cover the mortgage plus extra cover for any other debts you may have and some income for your family. This may be set for the life of the mortgage or for longer.

Critical Illness Cover-this policy can be a stand alone cover or can be part of the life cover, so that you may be covered for life OR a critical illness or even both. This policy pays out in the event of you suffering from an illness that is mostly life threatening, from a set list of illnesses.

Accident, Sickness & Unemployment- this is a fairly cheap policy that covers your mortgage payments and can cover some bills too in the event of you being off work due to an accident or illness, or you becoming redundant at no fault of your own, for up to 2 years.

Income Protection- this policy covers you for accidents or sickness for a longer term and for more illnesses, for example back trouble and depression which may mean you are unable to work for many years.

These are very basic meanings and there are many variations on a theme, but all of these policies when set up, are underwritten on certain information: age, gender, employment type and health conditions.

Now we can start to see why you should not cancel and re-start these policies. For many of us we were 20 something's when we started these policies and probably young, fit and well. If we cancel these now, we are older, may have had medical conditions that may incur ratings to premiums and critical illness policies have been recently altered to make it more difficult to claim, making older policies much better.

None of us know, what is round the corner, but with the recession starting to bite in the next few months harder than ever, consider the risk of redundancy and the stress that we are all under at the moment, we are all at higher risk of perhaps needing to claim. If you have not got these policies, perhaps now is the time to truly consider taking them, after all we spend a fortune each year on protecting our pets with pet insurance, to protect our income and our homes and families, to me is the most important thing in the world.

At the end of the day we don't appreciate these plans until we have to claim, a recent client of mine was recently diagnosed with breast cancer, he had in place critical illness cover, which he has not used to re-pay his mortgage, as his wife's wages were covering this payment easily, but he took his family to Florida, just to get away and reflect on his options, but helped immensely with his recovery. He also had income protection in place, which although was not as much as his wage, has certainly helped pay the bills and reduce financial worries at a time when he had enough to worry about. He is now on the mend, and recently phoned me to say he would be returning to work in the next 2 months. The main reason he phoned though, was to thank me for setting him up with these policies, when he probably had better things to spend his money on!

Ask for advice on these policies, as they can work out fairly cheap if set up in the correct way from the start, with guarantees attached so that they will not increase and family plans set up where couple's can save on administration charges. Again if you already have these policies in place, either get them reviewed or at least keep them going.

JANE PRICE (Nashelm Mortgage Solutions)

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