Hardened families who give in to the ‘temptation’ to cut a few pounds from their monthly expenses could find themselves facing hefty bills costing thousands of dollars, financial experts warn. The cost of living crisis has forced many households to reassess their dwindling finances, with services such as home insurance and pet insurance being among those canceled to save money.
But abandoning them could be a major false economy and leave policyholders struggling with unexpected bills of tens of thousands of pounds if the worst happens, a top insurance boss has warned. Drewberry Insurance has revealed that reducing the average cost of £140 a year for combined home and contents insurance could see households facing sky-high bills of around £32,000 if a flood were to strike.
Similarly, a broken boiler can leave families without hot water and removing a policy starting at £3.50 a month could lead to a claim of £4,000 to repair or replace it. Meanwhile, pet insurance can start from as little as £9.99 per month, but by dropping that, owners could shell out up to £5,000 out of pocket for a standard hip replacement from a four-legged friend.
The company also revealed that the policy it would urge the most to avoid canceling is income protection, which protects policyholders in the event of incapacity for work due to illness or injury. They encourage struggling customers to open a dialogue with their insurers to see if there is wiggle room in the price, rather than canceling them altogether.
Drewberry Insurance director Tom Conner said: “The obvious temptation for many people will simply be to cancel their policies. But these short-term savings could be more than offset by what they may have to pay in the event of a accident, major storm or your pet is injured.
“These types of issues can end up causing more stress and financial hardship in the years to come. We know people are struggling and looking to cancel expenses such as insurance products.
“But our advice would be to talk to their adviser or insurer first and discuss options that might help them. First and foremost, see if there is anything that can be done to help lower the cost of your policy. , this could mean looking for cheaper alternatives, or spreading payments over a longer period.
“Many companies are painfully aware of the current challenges and will seek to help their customers wherever possible.” Britons held around 34 million home insurance policies in 2021 to protect against destruction, damage and theft.
Mr Conner said: “Based on our years of experience working with our clients, the one policy we wouldn’t advise them to cancel is income protection. At the end of the day, if you can’t earn , you can’t afford to pay anything.
The soaring cost of living is putting household budgets under pressure, with some having to choose between heating and food.
Here are some resources available if you need help.
Advice to citizens
Citizens Advice is an independent charity providing free, confidential assistance with legal, consumer, housing, debt and other issues. Its website details the help available and where your nearest office is, for face-to-face advice.
Helpline : 0800 144 8848 in England / 0800 702 2020 in Wales (open 9am to 5pm Monday to Friday)
The Trussell Trust
The Trussell Trust supports a national network of over 1,200 food banks, providing free emergency food to those in need. You can use its website to locate support wherever you live.
Hotline: 0808 208 2138 (open 9 a.m. to 5 p.m. Monday to Friday)
Turn2us is a national charity that provides practical support for people in financial difficulty. Its website includes a benefits calculator and details about programs and subsidies in your area, including for energy and water bills.
Hotline: 0808 802 2000 (open 9 a.m. to 5 p.m. Monday to Friday)
“As far as life insurance is concerned, this is obviously a big deal and it’s worth pointing out that the average monthly policy only costs between £15 and £30, but the average payout (ABI stats) is a lump sum of £79,304 Our advice would be to not only review your spending, but also look for duplicates that you may not be aware of.
“For example, many banks offer travel insurance, mobile phone cover or even car breakdown cover as part of their package. If you didn’t know, you may have taken out individual policies to cover them.
“Therefore, canceling these types of expenses will not impact you because you are already covered.” Drewberry Insurance is a team of UK financial planners with offices in London and Brighton.
They provide financial advisory services to individuals and businesses across the UK on a wide range of topics from protecting personal finances to setting up benefits for large UK companies. For more information, please visit here.