Should You Cancel Your Life Cover To Fight The Recession?

More life insurance customers are opting to cancel their insurance cover in fear of their finances being eaten by the recession. Earlier in March, Sainsbury's Bank found that 300,000 customers had cancelled their life cover. Further more, according to recent figures released by the Association of British Insurers (ABI), the number of people opting out of insurance is increasing. Figures revealed that more than one in ten people have opted out of life insurance because of result of the current economical crisis. The research found that more Brits are either failing to renew their premiums or are cancelling them to help reduce costs during the downturn. According to figures from the Association of British Insurers, (ABI), the number of those without life insurance across the UK has soared by 13 per cent compared to figures from before the recession began. However, the ABI warned Brits that cancelling insurance is a false economy. False economy According to Malcom Tarling of the ABI, choosing to cut back costs by cutting back on insurance is a "false economy." He said: "It's a false economy. Insurance may seem expendable when family budgets are being squeezed, but people should think long and hard about the most sensible places to made savings rather than rashly cancelling essential cover." However, according to Stephen Haddrill, the director of ABI, people should only cancel their cover if it's the "last resort." He said: "In uncertain times insurance provides a vital financial safety net to steer individuals and families through the recession, as well as helping to provide long-term security. Ditching insurance or reducing your cover must only be a last resort." Furthermore, earlier this year, the life insurer, Prudential, urged life insurance customers to avoid cancelling their policies if they want to save. Why it costs more According to the firm, those who opted out of insurance were more likely to have to pay more in the long run. Kevin Karr, the director of protection development, at PruProtect said: "The long term cost of cancelling a policy could end up costing a customer thousands of pounds." The firm warned customers that the cost of the insurance increases, as the policy holder gets older. It stated that the average policyholder taking out insurance cover of £200,000 over 20 years would be paying £15 on their monthly premiums if they were aged 35. Yet the monthly premium for the same cover for a 45 year old would soar by over 50 per cent at £34.41. Mr Carr added that: "The danger in these uncertain times is that people may either postpone buying the insurance they need, or even consider cancelling what they already have. "Protecting the financial well-being of the family is vitally important, particularly in times of economic uncertainty." "Not only will the person not be insured but if anything happens to their health they may not be able to replace the cover they have lost. The numbers speak for themselves," he added.