INSURANCE: THE FIRST TO GO?

7 July 2017
INSURANCE: THE FIRST TO GO?

When times are tough and cashflow is tight it’s often the Insurance that is the first to be cancelled.  The reason seems to be that the client is unable to justify the expense as compared to the value.  In almost every instance the value has been underestimated.  However there may be a more appropriate way to assist with a tight cashflow in relation to insurance premiums.

  1. Cancelling the policy altogether.  The advantage of this is that you know exactly what you’re cancelling and the savings that it will make in regards to cashflow.  The disadvantage is that it could well be a case of throwing out the baby with the bathwater.  It could expose you to severe financial risk and even financial ruin should something occur.

  2. Lowering the cover.  This is preferred to cancelling the policy altogether as at least there will be some assistance should the worse happen.  That assistance may be sufficient to avoid the most severe financial fallout. 

  3. Changing the type of cover you have.  Not all types of insurance cost the same and if funds are tight substituting one expensive type of cover for perhaps a cheaper product may assist.  It will still be better than cancelling the cover altogether but should only be done in consultation with an advisor

  4. Formulating a plan that means less reliance on insurance eg the reduction of debt or having access to funds for emergencies to assist with short term needs until a permanent solution could be found.  An example of this could be having a line of credit giving you access to some funds if you were off work which would allow you to meet living expenses and financial obligations.  This would be considered a short term solution only but does buy time until something longer term could be found.

  5. Changing insurance agencies is not often going to return much of a benefit on cashflow.  It’s always good to keep reviewing insurance policies to make sure that yours is still the preferred one but recommendations are not always based solely on price. 

It is imperative to consult with an advisor prior to cancelling or changing policies as there may be other things that could accommodate the cashflow situation which are more appropriate.  When  cashflow is tight often stress levels are high.  Higher stress levels can foster adverse health conditions and it is generally regarded that Stress is our biggest Kililer.   So at a time when our risk is at one of it’s highest level, the need for insurance is even more necessary.  So cancelling a policy due to cost may not be the best strategy.

Published In The Whakatane Beacon

This post was written by

Trish Marsden - who has written 78 posts

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