In the present economic climate people are looking to cut back on their monthly outgoings and one of those that may be over-looked is unnecessary insurance.
By law we must have motor insurance but that is the only compulsory insurance and ideally it is wise to be insured for all eventualities, but, when times are hard they are not essential.
Firstly, think about losing mobile phone cover as a cheap replacement will cost little more than a monthly payment on a premium. Also, it may be covered on your home contents insurance, however, separate mobile phone insurance will cover any extortionate bills run up by thieves, but this could be considered a small risk. If you put the cost of the premium into a savings account you would be better off.
If you are single and have no spouse or dependants Life insurance is not relevant. A spokesman from Evolve Financial Planning says, 'I come across clients all the time who have been sold life insurance alongside their mortgage when they don't need it. If they die, the house will just be sold by the mortgage lender. Even if you like the idea of leaving something to a brother or sister, for example, most employers offer death-in-service benefits of four times' salary (saving you the bother of life cover). The trouble is these free death-in-service benefits are often very poorly communicated.'
Life insurance for a young, fit person would cost about 10 pounds per month for 100 - 200 thousand pounds worth of cover and over the term of a 25 year mortgage this amounts to 3,000 pounds which could have worked hard in a high-interest savings account. For couples without children it is worth considering just covering the highest earner or a cheaper joint policy which will pay out on the first death.
It is more likely that a person would be unable to work temporarily due to accident, illness or job loss which is why Mortgage Payment Protection Insurance (MPPI) is popular. Typically, it is priced per 100 pounds worth of cover; generally around 5 pounds per 100 pounds making a modest 1,000 pound per month mortgage cost 50 pounds per month in MPPI insurance.
Be warned - mortgage cover and Payment Protection Insurance (PPI), which is similar but covers other debts like HP and loan payments, are notorious for not paying out due to small exclusions including pre-existing conditions and back or stress-related problems (the most common reasons for absence from work). They tend to defer payment initially so you have to find the money in the first 30 - 60 days and then pay out for 12 months.
It is said that, if you are young and healthy, income protection is usually cheaper than MPPI as well as more comprehensive and will potentially pay out until you retire, as opposed to just between one or two years.
The spokesman from Evolve Financial Planning, says many people qualify for income protection through their employer for up to 75 per cent of their salary less state benefits until they retire or go back to work but it is taxable.
At any time of life it is wise to protect against terminal illness but critical illness policies are expensive and most people do not need both income protection and critical illness cover.
One type of cover that should never be compromised on is home contents; it is far too risky and you could face financial ruin if your house is destroyed by subsidence, flooding or fire.
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