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The cost of living and why you need life insurance

It’s been dubbed by many as “the year of the squeeze” – 2022 is set to be one of the most expensive years we’ve seen.

Yet, with the burden of costs as energy prices rise and the economic climate we’re in post-pandemic, it’s still so important to take out a life insurance policy, or keep hold of the one you already have.

At The Insurance Surgery, we pride ourselves on giving our customers the information and knowledge they need to make a decision on their life insurance policy, whether that be if they are taking out a new policy, or concerned about their current policy.

We hope our blog can be a place where customers can learn more about the benefits protection offers.

The financial impact of the pandemic

Since March 2020, the financial impact on families up and down the country is undeniable. Many businesses have struggled despite the government backed furlough scheme and now that all restrictions have been lifted, people are still suffering from the aftereffects of two years’ worth of inconsistent finances.

This financial fallout of the pandemic has unfortunately left many UK households and businesses with an unsustainable burden of debt and many people are continuing to feel the pinch of their finances.

According to Legal & General’s Deadline to Breadline research, one in five households have no savings at all, meaning a huge percentage of those struggling have no fallback plan apart from getting into debt.

The current cost of living

At the minute, there seems to be more and more negative news daily regarding the cost of living and the families that are struggling. The current rise in the cost of living places further pressure on our finances, leaving many worried about what the next few months have in store.

Because of this, understandably, many people are looking at ways to limit their monthly outgoings. This includes postponing long awaited holidays that haven’t been able to be enjoyed throughout the pandemic, cutting back on unnecessary food purchases whilst out and about, using less petrol or even remortgaging to release equity from their property.

Another thing that people are looking to do is cancel existing financial commitments that they may consider as ‘unnecessary’.

This includes things like Netflix, subscriptions to magazines, hobbies and even phone contracts. O2 are the latest to let their customers know of increases to their airtime contracts, leaving families with even more expense to pay out.

The energy crisis and increase in bills

You may have heard people coining the phrase “heat or eat” and unfortunately many families are facing that choice, especially in the next couple of months as we see an increase in energy costs.

Electricity and gas bills for a typical household will increase by 53% in April, amounting to £693 a year. There are fears that the Ukraine crisis could lead to further increases from October onwards. Around 18 million households on standard tariffs will see this average increase.

For pre-payment customers, this average will increase by £708, depending on how much energy you use. Some good news is that customers on a fixed rate are unlikely to see a significant increase until their deal ends.

The government have offered a council tax rebate for people who live in tax bands A-D in April to offset some of the rising living costs.

If you pay your council tax by direct debit, you don’t need to do anything.

People who pay council tax by direct debit, will see the cash go directly into their bank accounts from April. Those who do not pay by direct debit will be contacted by their council and invited to make a claim.

But what actually is the energy price cap, which is making our bills go up?

The energy price cap is the maximum price suppliers in England, Wales and Scotland can charge households – and this is what is increasing. More households are expected to find themselves facing fuel poverty, meaning they spend a disproportionate amount of their income on energy. This is the reason why so many people are worried about their bills.

There are several reasons why gas prices have gone up:
  • A cold winter in Europe in 2020/21, which has put pressure on supplies and reduced the amount of gas stored.
  • A relatively windless summer in 2021, which made it difficult to generate wind energy.
  • Increased demand in Asia (particularly China), which has put pressure on liquefied natural gas supplies
  • Wholesale prices rising further following the invasion of Ukraine by Russia, which is the world’s largest natural gas exporter.
Although the UK does not get a huge amount of gas from Russia directly, if Putin constricts supplies to Europe, it would drive wholesale prices worldwide. The UK would be hard-hit as 85% of homes use gas central heating. A third of the country’s electricity is also generated by gas.

Saving money on your energy bill

There are a few simple ways to try and cut back the price of your energy bill, including:

–        Turning the thermostat down by 1 degree

You probably will not be able to tell the difference, but it can save up to £55 per year.

–        Switch to LED bulbs

LED bulbs use less energy, and can save you up to £30 per year.

–        Do less clothes washing

Doing larger loads and cutting back on the amount of washing you do can make a huge impact. Doing one less wash a week can save £8.

–        Wash dishes by hand

As with the washing machine, you can save £8 annually by washing the pots one night per week by hand and cutting down on the dishwasher usage.

–        Draught proof the house

Making sure there are no draughts coming through your windows and doors can help you save an extra £25 a week.

It may seem like small amounts, but everything adds up!

What should I do about my Life Insurance?

Unfortunately, some people decide that their life insurance policy is one of those “unnecessary” direct debits that don’t make the cut when they’re looking through their financial commitments.

In times of financial crisis, long-term financial safety gets put on the backburner for a short term fix, which can be understandable given the economy we’re currently living in.

Research has found that one third of the UK population don’t see the value in income protection, for example. That perception prompts people to pull the plug on any policy they do have, believing it’s an unnecessary expense.

One in four consumers believe income protection is too expensive, with under 35s willing to pay a maximum of £30 a month towards it.

Unlike things like streaming service subscriptions or other luxuries, protection also has little immediate or short-term benefit, so it is perhaps unsurprising that it seems like an easy cost to cut.

At The Insurance Surgery we will always give you impartial advice and know it’s tough out there for a lot of people. However, cancelling your life insurance policy, income protection or critical illness cover could cost you sorely down the line.

We can help you assess your circumstances and give you all the information you need to know regarding the risks associated with forgoing your protection.

Many providers including big names like Legal & General can offer flexibility on policy payments, to allow you a little breathing space. We can help you change your payments to a monthly direct debit or reduce the sum insured if you are feeling the squeeze.

If you were to cancel a life insurance policy, particularly if you suffer from a medical condition, are a smoker, or have a high BMI, you will find that if you decide to take out your policy again down the line, your premiums could be much higher.

We always tell people that the sooner you take out a policy, the better in the long run. The younger or fitter you are means your monthly payments will be much lower, and continue to be lower if you do develop a medical condition.

We’re different from other brokers – we will always put your financial stability first.

If you do need to discuss your payments with our advisors, or you’re struggling to pay your premiums each month, we can help. Feel free to contact us for a check in and we’ll discuss your options with you.

It’s always worth talking things through before you decide to pull the plug completely. It is our job to make sure you’re completely happy with your policy and have the best protection in place for whatever comes your way.