Reflecting on the last 12 months, the protection market is in recovery mode following some tough trading conditions through the pandemic and into the cost-of-living crisis.
The lingering backdrop of higher household costs means we’re not fully out of the woods yet, though. That said, both scenarios have helped to raise awareness of the need for longer-term financial resilience, but, as always, we need to be mindful of pressure on households’ budgets.
Your protection policy
It’s almost inevitable that when families look to tighten household expenditure that protection policies come under the spotlight.
Admittedly it’s probably not the most exciting Direct Debit we pay each month, but I think it’s very important to consider the costs and implications of cancelling our protection policies.
Insurance premiums are calculated based on several factors that help the insurance company determine the level of risk associated with insuring a particular person.
For policies such as life insurance, critical illness cover and income protection policies, insurance companies will assess the risk associated with the individual and take into account factors like age, medical history, lifestyle habits and employment when assessing premiums.
Cancelling your cover
Any decision to cancel an existing policy must be given careful consideration, even if the plan is to take another policy in the future. Premiums will most certainly be higher as you will be older and an even more important consideration is, if you have sadly experienced any illness since cancelling your policy, then premiums could be even higher or obtaining cover may not be possible. So it’s certainly not as simple as thinking you will cancel a policy and take out another when household budget allows.
What to consider before cancelling
First let’s remind ourselves of the reasons why we would have taken out a policy in the first place. My guess is it was to protect your home, your family and your lifestyle, and I doubt this has changed. Many of us feel even more vulnerable and cautious following the pandemic years and protecting our loved ones and our home is a major priority.
When we take out a policy we often think about the chance of something terrible happening to our family, its worth considering what the risk is now, those risks will almost certainly be greater than when the policy was taken out.
Its also a good idea to look carefully at the added value services that most providers offer nowadays. These support services generally are available from the day the policy starts, cover the policy holder and their immediate family and are often at no extra cost to use. So using such services as physiotherapy, mental health support, bereavement counselling, a second medical opinion or access to a virtual on line GP can be invaluable to your family.
And finally, if your policy premium was originally higher than standard rates because you were for example, a smoker, had a dangerous job or hazardous hobby, bear in mind that if these risks no longer apply, then it’s always a good idea to approach your adviser as some insurance companies might be able to reduce premiums after a certain period of time.
