The cost of living saving people are making that could make life 'a million times worse'

Shoppers on Winchester's High Street on Black Friday. Picture date: Friday November 25, 2022.
Millions of people have cancelled their financial products, such as insurance, due to the rising cost of living (PA)

Experts have warned people against cancelling insurance policies to save money during the cost of living crisis, saying it could make their situations “a million times worse” in the long run.

New Office for National Statistics (ONS) data released on Friday suggest 8% of adults in Great Britain are now cancelling financial products such as pension payments, car breakdown cover or dental insurance due to rising bills.

This is also more common among people who live in the most deprived areas (11% having cancelled policies) than the least deprived areas (6%).

One financial adviser, Scott Taylor-Barr of Carl Summers Financial Services, acknowledged it is tempting to get rid of insurance in tough times. However his advice was simply: “Don’t.”

“You will have made your situation a million times worse if something happens and the protection you had in place to support you is gone.”

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He said it is better to find out from providers where costs can be reduced in current policies “without getting rid of all of your coverage completely. Something is always better than nothing”.

Another advisor, Samuel Mather-Holgate of Mather and Murray Financial, pointed out the statistics do not show what services people are choosing at the expense of financial products like insurance.

“If life insurance is being cancelled because energy bills need to be paid, it's unfortunate but an understandable choice. That is, of course, until you find out that Sky TV is still being maintained as a priority.

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“It's really important that advisers educate clients to the value of the policies they hold and if they cannot afford the full amount, have a conversation about what is affordable.”

The ONS figures painted a bleak picture of household finances, with 92% of adults reporting their cost of living had increased compared with a year ago.

Some 18% also said they do not have any savings while of those who are saving, more than a third - 34% - reported they had saved less this month compared with a month ago.

Experts have raised fears that soaring prices, including fuel bills, combined with the freezing weather, could have deadly consequences.

The average household's annual energy bill will currently be £2,500, up from £1,277 last winter (Yahoo News UK/Flourish)
The average household's annual energy bill will currently be £2,500, up from £1,277 last winter (Yahoo News UK/Flourish)

National Energy Action, a fuel poverty charity, have warned that people across the UK are struggling to heat their homes due to “impossibly high prices” during the cold snap.

It comes as people on the lowest incomes in hundreds of affected postcode districts in England and Wales are set to receive a £25 cold weather payment.

The government payments have been triggered for eligible households in areas where the average temperature has been recorded as, or is forecast to be, 0C or below over seven consecutive days.

But Adam Scorer, chief executive of National Energy Action, said more must be done, adding: “We hear daily from people who are forced to turn their heating off when they need it the most.

“The vicious choice is either huge debt or an unheated home, with dreadful consequences either way.

“We will now start to see just how bleak this winter is going to be.

“Despite the current programme of support, the government must step in with more help for those at greatest peril this winter.”