A recent survey of 1,000 adults by the insurer Friends First produced some alarming results:
• 70 per cent of respondents have seen their household income drop in the past year
• 40 per cent say their mortgage payments are their biggest concern and
• 45 per cent fear that either they or their partner could lose their job in the next year.
But one of the ways they are coping with their financial downturn is to –understandably – cut down on their insurance products, including motor and home insurance.
However, a very worrying 13 per cent have already cancelled insurance policies with a quarter of those people admitting they’d dropped their motor cover. Does this mean that they are now driving uninsured, or that they no longer have a car to drive?
Aside from breaking the law, uninsured drivers are taking a huge financial risk should they have an accident, as are 13 per cent who said they got rid of their buildings insurance, something else you are obliged to have if you are a mortgage holder.
Disturbing as those figures are, 28 per cent had cancelled their life insurance, 22 per cent their critical illness cover and 10 per cent their income protection policy.
The life insurance cancellations are very worrying, given how low the coverage already is at just 43 per cent for life assurance, 18 per cent for critical/serious illness insurance and 9% for income protection and how important this kind of cover is for anyone with a dependent partner or children.
Term life insurance remains one of the cheapest forms of insurance in Ireland compared to other countries and premiums have remained quite static, compared to the way non-life insurance premiums have been soaring, Martin Duffy of Irish Life told me last week.
Serious illness cover, which is very much aimed at self-employed people and especially to women, who work both in and outside the home, is also a subject of cancellations as the recession bites.
Irish Life, which has paid out €178 million worth of serious illness claims in the past decade, has just re-launched its serious illness insurance.
It is to extend its tax free cash benefit to 10 conditions or illnesses where there is an early diagnosis – for example, non-invasive breast cancer tumours or early prostate cancer diagnosis.
There are 37 specified conditions and illnesses covered by Irish Life plus another 10 for partial payment.
This has been on of the weak points of serious illness policies up to now as so many more illnesses like cancer are being caught early by advanced screening and it is something that Irish Life recognised needed to be improved said Mr Duffy.
Under the new contract, Specified Serious Illness Cover, policy holders will receive up to half of their agreed benefit to a maximum of €15,000, whichever is the smaller figure. Such a claim does not stop future claims on the policy, he said.
The cost of €100,000 worth of serious illness cover for 15 years for a 45-year-old woman – age 54 is the average age of a breast cancer diagnosis – is €68.97 per month under the new plan and just over €75 a month for a 45 year old man. The average benefit is €60,000.
This may sound expensive as incomes are falling and belts need tightening, but before people automatically cancel valuable protection policies “they should give us or their broker a ring,” says Martin Duffy.
“Rather than leaving your family with no benefits if the worst happened, you can scale back” and make savings that way,” he said.
You should also certainly shop around between the providers to see whether you can make additional savings, but keep in mind that the older you get, the more expensive all protection policies become.
Is serious illness cover worthwhile, even in a downturn like this? I think so. I have a policy myself (not with Irish Life) which would cover my annual expenses and the cost of hiring a housekeeper to take on many domestic jobs that I’d be unable to do so due to a serious illness.
I have this cover because as a self-employed person, I don’t have benefits paid for by an employer.
A good broker can help you decide what priority you should place on your different insurance policies but don’t forget to check PostBank and other non-commission providers with whom brokers do not deal:
Don’t over-insure your house or car. The replacement cost of buildings has fallen in the past year.
Check the Society of Chartered Surveyors latest rebuilding cost survey at www.scs.ie for the rebuilding value of your home and the Revenue’s website (ros.ie) for the actual value of your year and model of car.
The older your car (and the older you get too) the cheaper your car insurance should be.
To conclude this week, a ‘to do’ list:
* Agree to a higher ‘excess’ payment that you make before the rest of the claim is paid.
* Reduce the term or the value of protection policies to cut the cost of the premium.
* Ensure at least that the breadwinner always has some life insurance and that the homemaker has a minimum amount of cover. See the Financial Regulator’s price survey: www.itsyourmoney.ie
*Give up smoking; term life insurance can be half the cost for non-smokers.
* If you also have health insurance, get your policy reviewed and remember to switch to the corporate version of your plan or even the corporate version of a cheaper plan to reduce costs. – see last week’s column for more details about this automatic savings.
Signed copies of Jill’s personal finance guide, The TAB Guide to Money Pensions & Tax are available at www.jillkerby.ie for just €10 including postage.
For all your banking and insurance needs, check out Postbank at your local post office or LoCall 1890-30-30-40 and feel free to Email Jill (email@example.com)