Cancelling insurance policies to be debt free..... good idea or not?

Dr.D

Hi all,
So I thought I would post on here to get some advice. I am fed up of living in debt and determined to make changes. I am thinking of cancelling a couple of policies I have, mainly critical illness level cover it is £85 per month if I cannot work, occupation only. But I would still retain life insurance, and sickness / illness cover ( self employed.) I figure £85 is quite a bit, for £180k cover, it will cost me around £18k during the term of the policy, or do I gamble and start saving all these "added expenses" and get rid of the policies, then at least I have something at the end if nothing happens to me.
Any advice on this and general cut monthly budget tips would be greatly appreciated.

Tixy

Its a tough decision, and does depend a lot on your personal circumstances.

First off have you looked to see if the amount you are paying at the moment is competitive? And have you looked if the level of cover is right for you?

Have you looked at what illnesses are covered under the critical illness cover and the likelihood of you being affected by them, considering you age/gender/health/weight etc

Personally I don't have critical illness cover, my decision I based on the fact that if I am ill and unable to work for longer than my ASU would pay out (2years) then I would be able to downsize my property to one I could afford to buy outright using the equity in my property, and that I think without housing costs I could manage financially on benefits etc.

andyfromotley

Hi Dr D,

welcome, thats a very personal decision about the critical illness, however the plain fact is if you are in debt then you probably can't afford this.

The best way to get help in general is to fill this in

http://www.stoozing.com/calculator/soa.php

and post it on here, there is a button on there to format it for this forum

you will be amazed at the amount you can save with the advice from people on here.

immoral_angeluk

£85 a month?? Jeez...

Have you looked around to see if you can get anything cheaper? That is a ridiculous sum of money to pay in insurance each month and creditors would be very unlikely to accept it being that high without good reason.

Credit-Crunched

immoral_angeluk wrote: »

£85 a month?? Jeez...

Have you looked around to see if you can get anything cheaper? That is a ridiculous sum of money to pay in insurance each month and creditors would be very unlikely to accept it being that high without good reason.

Why?

It is relevant to each person, the OP may have 4 dependent children and no work based protection. So diagnosis of a critical illness with no protection might be too much to risk.

I pay a similar sum in Critical Illness and the same again in Income Protection. For me it is important.

This question can not be answered on a forum, and I would advise against anyone recommending cancelling this.

Imagine if the OP cancelled, and then had a hear attack a week later, missing out on £180k...

go to unbiased.co.uk look for an IFA and they will do a full cost analysis of your needs, and look for the best option for you.

immoral_angeluk

Credit-Crunched wrote: »

Why?

It is relevant to each person, the OP may have 4 dependent children and no work based protection. So diagnosis of a critical illness with no protection might be too much to risk.

I pay a similar sum in Critical Illness and the same again in Income Protection. For me it is important.

This question can not be answered on a forum, and I would advise against anyone recommending cancelling this.

Imagine if the OP cancelled, and then had a hear attack a week later, missing out on £180k...

go to unbiased.co.uk look for an IFA and they will do a full cost analysis of your needs, and look for the best option for you.

I'm thinking of it in terms of reasonable expenditure when it comes to creditors considering payment offers or if the OP were to consider insolvency. There is not a chance in hell they would be allowed £85 a month on one insurance policy. You'd struggle on that amount with numerous policies...
It would be expected that the OP reduce the amount, cancel it or sacrifice expenditure elsewhere to make up for it. Generally £35-£40 would be acceptable UNLESS it was a compulsory part of a mortgage installment.

paulsad

I'd say no - well maybe pair them down a bit?
My reason is the only thing I've kept going over the past turbulant 14 yrs (own business closing, chasing jobs, downsizing) is our joint insurance policy which is £34 per month. I am now in situation of getting a small mortgage again late in life - and my cover is still going to last the term of the mortgage giving us a lot of peace of mind - we'd never get such cover at this age for the amount we pay so in a sea of wrong decisions this has been about the only decent one I've made.
Of course your situation may be miles different but at least you're doing the right thing in giving serious thought to it - Good Luck! whatever you decide.

Sazzie23

One point to remember is that getting insurance when you are well is much more feasible than trying to get it once you are or have been ill. That's when you need it and it's too late. My OH had term insurance which expired at 65, he got ill at 63, no way anyone would insure him after that, he died at 66, uninsured and with outstanding debts that we couldn't cover.

I'd be very wary of cancelling an insurance policy without taking good impartial advice.

But I do hope you never need to claim on it.

January2015

I wouldn't cancel insurance policies. As someone who has had the need to claim on my critical life policy (cancer) I can honestly I don't know how I would have coped with serious illness and finance worries without the policy payment.

My illness crept up silently on me (cancer) and literally one month I was fine and life was good, the next month I was ill, the month after I was in hospital having major surgery and months of aftercare and treatment after that. What I'm trying to say is that you may think you are fine now but illness hits, often without much warning.

Our policy was critical illness and life. It paid out a percentage of the policy value on diagnosis of critical illness and the life policy continues to be in force. I would now struggle to get life insurance for the value I pay for the policy. We only have the 'life' element left as we have claimed the critical illness element - but we have affordable life cover for a sum that will ensure should I die my husband will not have to worry.

PS....I don't plan on dying anytime soon and am all clear of cancer.