Sometimes it feels like this conversation is a broken record, constantly going round and around on the same track: people the world over are feeling the financial pinch and tightening belts.
It’s not just a local issue, and it’s not a new concern.
A few minutes on Instagram or Twitter will reveal just how many are building their third, fourth or fifth ‘side hustle’. This is partly because our internet age has made alternative streams of income more viable, but also because our current economic pressures make it almost impossible for families to cope with a single, or even dual, income.
When external pressures leave us feeling hard-pressed, it may be tempting during such times to reduce or release our risk cover policies – with life cover being a common policy to cancel. Sometimes, these decisions are made in order to maintain a certain living standard – however, this could have dire financial consequences for your loved ones.
Life cover is never an easy conversation to have. And when things are tight, you have to weigh up paying your monthly premiums against the potential effect on your family if they were to lose your income entirely in the event of a disaster.
The problem with cancelling your life cover isn’t just that it is a massive risk, but that it also may be impossible to replace it as you grow older.
Many people may assume that you can simply cancel your life assurance then reinstate it when it’s easier to afford. However, premiums are likely to be substantially higher when you’re older (cover is said to cost double at the age of 45 what it costs at age 25). Health conditions may also be excluded from the cover and, in the worst case, you may even be uninsurable if you are diagnosed with certain illnesses.
Even missing the payment of a few premiums can have a negative effect. Not only may you need to undergo the underwriting procedure again, but any deterioration in your health would be taken into account when considering policy reinstatement and premiums.
So what are the alternatives?
4 possible alternatives to cancelling life cover (this is not financial advice)
1. Reduce your monthly expenses
Cut back on items that aren’t essential, such as your television subscription. Critically evaluate your budget and examine what is imperative versus what you just would like. Remember, this is not forever, it’s about prioritizing your financial security.
2. Re-negotiate your debts
Try approaching creditors or your bank to negotiate terms of any repayments. They may be willing to accept smaller sums over a longer period.
3. Press pause on your savings
Consider taking a ‘payment holiday’ on your contributions to an investment portfolio.
4. Negotiate your premium payment pattern
Request to change to an escalating-premium pattern for your life cover, which means that your initial premiums will be lower and increase over time.
Please note that the above four points are suggested options, if you would like to review your plan inside of your changing situation – please arrange a meeting for us to objectively make the best decisions according to your individual needs. It is important to stay educated about life cover and informed about affordable solutions, so please discuss this if it is a concern.