- 27
- Jun
As the ongoing effects of the credit crunch continue to make themselves felt, consumers may find that protecting against redundancy becomes a priority in terms of insurance cover.
Such is the suggestion of David Kuo, head of personal finance at the Motley Fool. Commenting recently, he asserted that while some people may be looking to cut back on the amount of cover they have, taking out a payment protection insurance (PPI) may prove an attractive option as Britons look for peace of mind in turbulent economic circumstances.
His comments follow recent research by YouGov and DeLoitte which indicated that more than a quarter (26 per cent) of people who purchase insurance policies from price comparison sites are looking to cut back on the number of protection products they have. Around one in five (21 per cent) said they would reduce their PPI cover. Meanwhile, 18 per cent of people said they would downgrade their motor cover from comprehensive to third-party, while 12 per cent were looking to make cutbacks on the amount of travel insurance they opted for.
For those looking to obtain a PPI policy to protect them in the event that they are made redundant, Mr Kuo advised them to shop around to make sure they get the most competitive deal. He also urged consumers to check the small print of all policies to make sure they understand the limitations of payouts.
A failure to take out a PPI policy could result in people turning to secured loans or other forms of credit in order to meet the cost of outgoings as income dries up.
Commenting on recent statistics released by the Motley Fool indicating that Britons typically spend 1,500 pounds on insurance every year, Mr Kuo insisted that the tightened economic circumstances of recent months may stimulate people into renewing their policies in order to make a saving. He noted that doing so may be particularly useful for the one-third of people who were said to have no idea how much cover they had.
“The credit crunch is therefore an ideal opportunity to sift through our finances to identify what policies we have taken out, which are essential and which should be thrown out with the trash. For example, motor insurance is compulsory if you own a car and building insurance is a must if you have a mortgage. Apart from these two insurances, the rest should be up for review,” he said.
Responding to figures showing that 18 per cent of people would be cutting back on car cover, Mr Kuo urged people to consider whether they could afford to bear the cost or carrying out repairs or buying a new vehicle.
“If you buy insurance you don’t need then you are wasting money. But if you don’t buy insurance that you do need, then eventually your decision will come back to haunt you,” he insisted.
For those who have found themselves short of cover, taking out a secured loan may prove an effective way to meet the costs of getting a vehicle back on the road. Taking out this type of loan may also leave people with enough spare capital to make sure they can make adequate insurance arrangements in the future. Earlier this month, the AA also reminded caravan owners of the need to make sure their motor homes are adequately insured before they head off on their holidays.
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