Hard-up families who give-in to the temptation of trimming a few pounds off their monthly outgoings could end up facing hefty bills costing thousands, finance experts are warning.
The cost-of-living crisis has forced many households to reassess their shrinking finances, with services such as home insurance and pet insurances among those being cancelled to save cash.
But ditching them could be a major false economy and leave struggling policyholders facing unexpected bills of tens of thousands of pounds if the worst happens, a leading insurance boss has warned.
Drewberry Insurance revealed cutting the average cost of £140 a year for combined home and contents insurance could see householders faced with eyewatering bills of around £32,000 if a flood was to strike.
Similarly a broken boiler can leave families without hot water and scrapping a policy beginning at £3.50 a month could result in a demand for £4,000 to fix or replace it.
Meanwhile, pet insurance can start from £9.99 a month but ditching this could see owners fork out up to £5,000 out of pocket for a standard hip replacement for a furry friend.
The company also revealed that the one policy they would urge most caution against cancelling is income protection, which safeguards policyholders in the event they become unable to work due to illness or injury.
They are encouraging struggling customers to open a dialogue with their insurance providers to see if there is wriggle room in the price, rather than cancelling them altogether.
Drewberry Insurance director Tom Conner said: “The obvious temptation for many people will be to just cancel their policies.
“But these short-term savings could be massively outweighed by what they may have to pay out if there’s an accident, a major storm or your pet gets injured.
“These types of issues may end up causing more stress and financial challenges in years to come.
“We know that people are struggling and looking to cancel outgoings such as insurance products.
“But our advice would be to speak to their advisor or insurer first and discuss the options that might help them.
“First and foremost see if anything can be done to help lower the cost of your policy, this could be looking at cheaper alternatives, or spreading payments over a longer period.
“Many companies are painfully aware of the current challenges and will look to help their customers where possible.”
Britons held an estimated 34 million home insurance policies in 2021 to protect against destruction, damage and theft.
Conner said: “From our years of experience working with our customers, the one policy that we would not advise them to cancel is income protection.
“Ultimately, if you can’t earn, then you can’t afford to pay for anything.
“When it comes to life insurance, this is obviously a big one and it’s worth highlighting that the average monthly policy only costs between £15 to £30, but the average pay out (stats from ABI) is a lump sum of £79,304.
“Our advice would be to not only review your outgoings, but to also look for duplications that you might not be aware of.
“For instance, many banks offer travel insurance, mobile phone cover or even car breakdown cover as part of their account package.
“If you weren’t aware of this, then you might have purchased individual policies to cover them.
“Therefore cancelling these types of outgoings won’t have an impact on you because you’re already covered.”
Drewberry Insurance is a team of UK financial planners with offices in London and Brighton.
They provide financial advice services to individuals and businesses throughout the UK on a wide range of topics from protecting personal finances to setting up Employee Benefits for large UK companies.
For more information, please visit https://www.drewberryinsurance.co.uk/
Featured image credit: Rusty Wallet via Flickr under CC BY 2.0 license
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