Why you shouldn't cancel your life cover
When money is tight, insurance is one of the expenses people look to cut back on.
08:42 13 June 2013
But stop and think carefully before cancelling any policies - especially life insurance. It is a necessity if you have loved ones dependent on you financially or you have large debts that they'll be lumbered with once you've gone. Here are the main reasons why you shouldn't cancel your life cover.
- It's a myth that debts die with you. So long as you have money and valuable assets to leave behind (including property) they will be used to pay off your debts before any savings or assets are passed on to your beneficiaries. By having life insurance, the payout can be used to clear debts such as your mortgage leaving anything else you own to your family and friends.
- It's a waste of money to cancel early. The most popular form of life insurance is term insurance which pays a lump sum if you die within the term (the length of time the insurance runs). By cancelling during the term you will get nothing back for all the premiums you've paid as, unlike whole of life insurance, there's no investment element to it unlike. This makes term insurance the cheapest and simplest option.
- Your premiums get more expensive with age. Insurers work on the average life span making life cover pricier the older you are - and one thing that will definitely have changed if you cancel and apply again in a few years' time, is your age. So stopping your life cover when you're young means that if you take it out later, it'll be more expensive.
- The same applies to your health. If you have a serious illness before you take out life insurance this will influence how much you have to pay in premiums. If you cancel a policy while you're still healthy and then suffer from health problems, you'll be charged more when you take it out later.
- Your job may have changed. If you've changed jobs by the time of your next application, this could also have a negative impact on your premiums. If you work in an office for example, you are considered to be working in a safe environment and therefore low risk. But if you later became a salesperson driving hundreds of miles round the country, you would become a riskier person to cover.
- Even a change of postcode may also influence the cost of your life insurance. Not all insurers do this, but some take the first three letters and numbers of your postcode and run them through their system to assess how risky you are. People living in postcodes that cover poorer areas in Britain may be charged more as statistics show that those in more deprived areas are more likely to die at a younger age than those in wealthy areas.
One time it IS worth checking out your life policy however, is if you took it out many years ago. The cost of life insurance has fallen dramatically in the last decade. Find out if you could get it cheaper now by asking us to give you a new quote. If you can, tell your insurer and see if they'll match it. If not, then you can switch - just don't leave yourself without any cover in the process.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.
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