Ian Sawyer, Commercial Director at Assured Futures, discusses why panic-cancelling policies shouldn’t be rushed into by those panicked by the current pandemic without first taking into account the potential consequences.
Whilst of course, given the current circumstances, it seems logical that those facing a significant drop in income or uncertainty regarding their level of financial security would want to cancel any regular payments they deem unnecessary, we would strongly advise against this without serious prior thought.
Below, we’ve outlined the most important factors to consider before taking any drastic measures regarding different policy cancellations:
Private Medical Insurance
• Health/Medical insurance excludes conditions before you first bought the policy so if you bought a policy 5 years ago any condition prior to 5 years is excluded but any condition since then is cover, but this is only maintained when you continue cover. If you stop and the re-buy later, your insurance clock starts again and everything you have experienced right up to the new start date will now be excluded where it would under a continuous policy. This essentially means that any medical condition the holder had prior to setting up a policy in the future likely won’t be covered. Keeping an existing policy will ensure that these conditions and any new conditions remain covered.
• Putting aside the current pandemic, those with health insurance are still at risk from becoming ill with other conditions aside from the virus. If an individual keeps their cover and develops cancer, an unknown lump or even a sore joint, their policy will continue to help them with treatment.
• Whilst health insurance is normally taken out to cover individuals for consultations and operations, other positives associated include NHS cash benefits if they’re admitted to hospital, virtual GP appointments, digital physiotherapy and even mental health support. During this unprecedented time more insurers are extending support and access to these digital services across their books of business.
• When this pandemic is over, there is no doubting that the NHS will take some time to recover, meaning that non-essential operations will continue to be delayed for an as yet unknown length of time. By keeping their existing PMI policy in place, one can ensure they are seen privately and have any procedure urgently needed in a timely manner to improve their quality of life and gain a sense of normality back sooner rather than later.
• The insurers that we work with are currently looking at ways of helping their customers in this time of potential financial difficulty. Reducing cover, increasing excess, changing plan types and in some cases even offering payment holidays are all being put in place to support policy holders worried about affording their payments. All aforementioned changes can be implemented midterm and policies can be changed back when required. This will help to give those with financial concerns a promise of continuity whilst reducing their short-term outgoings.
• Customers also need to be aware that if they have made a claim during this policy period, that they may still be liable to pay the premium in full even if they decide to cancel.
Income Protection Insurance
• An Income Protection (IP) policy is put in place to provide the holder with an income should they find themselves out of work due to accident or sickness, and should always be purchased with the short, medium and long term view of an individual’s circumstances.
• What we are currently witnessing in the UK is a pandemic, but one should remember that they are still at risk of being involved in an accident or developing a separate illness, so there is still a need to keep your income protection policy on risk.
• No matter how difficult a task it may seem at the present, it’s of the utmost importance to think past the current pandemic as unfortunately the population will be just as susceptible to the risks of other illness once this crisis is over.
• Many policies are also linked and go hand in hand with mortgages, so those thinking of cancelling their IP policy should be extremely wary of the future and what would happen to their lifestyles, as well as their families protection, should they find themselves without an income.
• Those who have an IP policy in place with a guaranteed premium amount, and should be under no illusion whatsoever that they are unlikely to ever find a price that low in the future should they go ahead with a cancellation and decide to take out another policy down the line
• Those with unemployment insurance must keep this cover at all costs as this type of insurance is now no longer available and if it returns in the future will be restricted and more expensive.
• Some IP policies also come with a plethora of benefits such as digital GPs and health MOTs, and may not be aware of exactly what they are sacrificing for their future selves by cancelling.
Life Insurance
• As we age, the premiums relating to life insurance policies will become more and more expensive, so keeping an existing policy in place will protect your current low monthly premium.
• The added benefits of having Life Insurance often now include access to digital GPs, second medical opinions and many more services that will benefit either the elderly or those who find themselves in poor health.
• Life Insurance will ensure that a policy holders’ family will receive a lump sum that can help pay off the mortgage, cover the expenses of a funeral or help support them during a time of financial need.
• Policy holders are covered should they pass away due to the Covid-19 virus.
• Anyone that makes the decision to cancel their policy may be denied new Life Insurance cover if they’ve suffered a serious medical condition since taking out their original agreement.
Accident, Sickness and Unemployment Cover
• Firstly, unemployment cover is currently unavailable on the market, so anyone with this should not be cancelling as they may not be eligible in the future to purchase it again. If it does become available again, it is also worth noting they would be subject to an initial exclusion period with any new policy.
• Those with a long-standing redundancy should avoid cancellation at the present time. Many employers will face some financial struggle due to the current pandemic which could last quite some time, and they may suffer as a result.
• Accident, Sickness and Redundancy cover provides people with an income whilst they’re out of work, so retaining a policy will allow holders to keep a roof over their heads and up to date with bills.
• The younger one is when they purchase cover, the better. One will not be covered for any pre-existing medical conditions so should think twice about cancelling a policy if they’ve developed any on-going illness or suffered an injury since taking it out.
• Accident, Sickness and Redundancy cover does not need to be expensive, and an affordable policy should be kept for long term as it can help through any challenges faced during ones working life.
Over 50’s Cover
• If those with an over 50’s cover decides to cancel a policy, they will lose their agreement and all premiums paid so far.
• Policy holders should remember why they took their policies out in the first place, it could help with funeral costs or to leave some money behind to a loved one.
• As one gets older, the monthly costs associated with their cover will become more and more expensive, so keeping a policy in place will protect a monthly premium.
• These plans ask no medical questions, meaning one will be covered should they pass away due to coronavirus (as long as they’ve gone through the waiting period)
• Policies can come with added benefits such as digital GPs, counselling and bereavement support services, all of which one would lose access to upon cancellation
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