Are There Risks to Cutting Insurance Coverage?
Should Insurance Premiums be Avoided to Save Money?
Jun 16, 2009
The majority of families are seeking ways and means to save money and reduce household bills. With family finances becoming increasingly stretched, consumers are foregoing insurance coverage in order to cover other expenses. Whilst paying insurance premiums may be perceived as a luxury that can be done without, this would not be the case should the unexpected happen.
What is the Purpose of Insurance Coverage?
Consumers choose to pay their monthly insurance premiums in order to provide a sum of money should the unexpected happen. As soon as payment stops, the insurance coverage also comes to an abrupt halt. This means that there is no safety net should an emergency situation arise.
Why do Consumers Stop Paying Insurance Premiums?
- Unnecessary financial burden. Some forms of insurance are considered a luxury.
- Family finances. Free-up money for the payment of other household bills.
- Never made a claim. The unexpected event has never happened so it never will.
David Corum, vice president of the Insurance Resource Council, stated: "People are willing to take on more risk in tough economic times to save money, but when they do that, the outcome can be catastrophic."
Why Stopping Insurance Coverage is not Advisable
- Life and critical insurance cover. How would a person cope financially should they develop a life-threatening condition and could no longer work?
- Home insurance. What would happen if a house was burnt to the ground? Who would take care of the costs?
- Unemployment insurance. How would a person cope financially if they lost their job and had to rely on benefits alone?
- Car insurance. What would happen if an accident took place when driving a car?
How to Save Money on Insurance Premiums
- Online insurance comparison. An online comparison service provides a consumer with an opportunity to search the entire market for the most cost-effective deal. Never purchase coverage from the first place visited as there are hundreds of insurance providers.
- Insurance deductibles. Consumers that wish to save money, yet maintain full insurance coverage, can increase the insurance deductible from $250 to $500.
- Multiple products. Family finances can be improved by purchasing two or more products from the same provider. A number of insurance providers offer consumers valuable discounts.
- Avoid small claims. Consumers that avoid small, nuisance claims can save money as they will be offered cheaper insurance premiums in future years.
- Stay with same insurer. Maintaining a relationship with the same provider can earn the insured a reduction for their loyalty. However, it is normally advisable to trawl the market for cheapest and most comprehensive insurance coverage.
The non-payment of insurance premiums may save money to help with other household bills, but it could be catastrophic in the event of an emergency situation. Whilst it is possible to take steps to reduce premiums, insurance coverage should rarely be stopped completely.
Those that found this article useful may also be interested in taking out critical illness insurance or life cover to protect their families. Pet insurance can also help families save money on veterinary bills.
Sources
Augstums, Leva. (16 June, 2009). "During recession, consumers should keep insurance" The Boston Globe.
Disclaimer: This article in no way attempts to give legal advice. One should consult a licensed insurance agent or other qualified professional for more information about property insurance.
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