Almost half of Britons have cancelled either an insurance policy or their pension contributions as the rising cost of living stretches household budgets, meaning that 19 million people are potentially sacrificing their financial security in favour of saving money.
The first things to go for cash-strapped Brits are car breakdown cover
and private dental or private health insurance
, with life insurance
coming in as the third financial product most likely to be sacrificed to reduce monthly outgoings.
The research, carried out by uSwitch.com, found that one in ten of the 42 per cent of people who have cut back on spending have stopped making pension
Of those who have cancelled insurance cover, 15 per cent have got rid of their car breakdown cover, 15 per cent have dropped health and dental insurance, and 13 per cent have ditched life insurance cover.
It seems that some Brits put the value of their home above the value of their lives and health, as just six per cent of those who have cancelled cover included home contents insurance in the culling of unessential expenditures.
As a reflection of the current economic turmoil – as increasing number of people fear losing their homes and their jobs – mortgage payment protection insurance was also one of the least likely policies to get axed, with just seven per cent cancelling this type of cover.
Households that have cancelled pension contributions and insurance policies are making average monthly savings of £50 each, and one in 10 are saving themselves as much as £50-100 every month.
While cutting back on insurance and pensions might seem like a good idea in the short term to make it through the credit crunch, but they might pay the price in the future when they find they need the cover, uSwitch warns.
For one thing, if the 12 per cent of people cutting back on spending that have stopped paying into a pension are unable to make up their contributions over the coming years, they could find that their pension does not stretch far enough when the time comes to retire.
"With money getting tight, it's not surprising that consumers are looking for ways to cut their spending." comments Ashton Berkhauer, insurance expert at uSwitch.com. But, he warns, "there's a big difference between cutting down on luxuries or your weekly shop and cutting out on life insurance or pension savings. The potential impact on you or your family finances if you get it wrong could be huge and long lasting, so it's important to go into it with your eyes wide open."
Mr Berkhauer recommends that consumers compare insurance
quotes to make sure they get the cover they need at the best possible price.
Commenting on people cutting back by cancelling financial protection, Alan Ferguson at Legal & General said: "One consequence of the economic turmoil is that people have woken up to what risk really means...what it looks like when the unthinkable actually happens.
"For as much as people want to trim their budget at this time, the numbers of people taking out life and health cover to protect their families against the unthinkable has actually increased. I would urge anyone thinking that this was a luxury to look around them and think again".
© Fair Investment