While times have been tough for household finances lately, Prudential is urging people with life insurance not to cancel their policy because it could cost them a lot more to replace it in the future.
It could cost thousands of pounds to replace a policy, so cancelling it now because budgets are stretched could prove to be false economy, the insurer warns.
Many consumers are looking for ways to cut costs at the moment, and insurance
policies such as life insurance
are often one of the first expenses to be reviewed, but PruProtect – the joint venture between Prudential life insurance
and South African market leader Discovery – thinks that consumers should consider the consequences very carefully before they cancel it.
The cost of replacing it later on could be more expensive because of age – life insurance generally gets more expensive to take out the older the policyholder gets, so this could cost thousands in additional premiums.
Additionally, cover could be more expensive later on because of changes in circumstances or lifestyle, such as a deterioration of health, and this could also end up meaning that individuals are rejected for cover completely when they try to take it out later.
Even for those who remain in good health, replacing cancelled life insurance cover which includes critical illness insurance
at a later date could cost more than £6,000 over the term of the policy.
"The danger in these uncertain times is that people may either postpone buying the insurance they need, or even consider cancelling what they already have." said Kevin Carr, director of protection development at PruProtect. "Protecting the financial well-being of the family is vitally important, particularly in times of economic uncertainty."
At the age of 35, the average policy holder taking out £200,000 of life cover over a 20 year term would pay a monthly premium of £15, but this rises to £17.52 over a 17 year term if the cover is taken out three years later, so it would cost an extra £514.08 over the term.
For 45 year olds taking out the same level of cover, average monthly premiums would cost £34.41, rising to £41.23 for a 17 year term, a total difference of £1,391.28.
"The long term cost of cancelling a policy could end up costing a customer thousands of pounds. Not only will the person not be insured but if anything happens to their health they may not be able to replace the cover they have lost. The numbers speak for themselves." Mr Carr added.
© Fair Investment