According to Martin Lewis of Money Saving Expert, there is an easy way to dramatically reduce the amount you pay for your car insurance. According to media reports, it’s a simple step that could potentially reduce your insurance cost by more than £500 – and it all comes down to timing.

The financial journalist and broadcaster has warned that if you wait until just before your new insurance policy is due to start the cost could rise by up to £546. Yet, as the illustration below from Money Saving Expert shows, if you renew your car insurance 21 days before the new policy is due the cost of the insurance is likely to tumble.

Source: Money Saving Expert

The reason for this this decrease? It’s all about risk.

Insurers believe that if you take out a new policy 21 days before it is due to start, you are more organised and, therefore, more careful. As being careful means you are less likely to claim against the policy, insurers reduce the cost.

“If you are the type of person who leaves it till the last minute, risk charts show you’re a more risky person, so they’ll charge you more”, Martin recently told the media.

But your car insurance isn’t the only insurance that is likely to become more expensive the longer you leave it.

Coronavirus has highlighted the need to protect your income in the event you cannot work, or your life to ensure your family can remain financially afloat in the event of your death. Like car insurance though, the more you delay taking it out the more expensive it is likely to be.

The worst-case scenario could be that it becomes too expensive to afford, meaning your household has no financial safety net should you become ill long term and lose your income, or die.

Read on to discover the different the kinds of protection that could help ensure your family’s long- term financial future, and why the cost goes up the longer you leave it.

Income protection could help you maintain your lifestyle if you can’t work

If you have dependents who rely on your income to pay household bills, the sudden loss of it could have serious implications.

With income protection, part of your income is covered if you lose your earnings due to long-term illness, becoming disabled or having an accident. It will continue to pay until the earliest of the following happens:

• You return to work
• You retire or die
• The policy reaches the end of its term.

Income protection can cover many illnesses that may leave you unable to work, and could help you:

• Maintain your lifestyle
• Continue pension contributions to ensure your retirement plans remain on track
• Take as long as you need to recover from an illness. If you are struggling financially as a result of not working, you may have to rush back to work before being fully recovered.

There may be some exclusions, such as the conditions you are covered for, so always speak to a financial planner to fully understand what a policy covers you for.

Critical illness cover pays a lump sum if you are diagnosed with certain illnesses

If you are diagnosed with an illness covered by a critical illness cover policy, you will receive a one-off lump sum. It might also allow for ongoing payments in some circumstances.

A stroke, heart attack, and certain cancers tend to be covered, and conditions such as multiple sclerosis, organ transplants and Parkinson’s disease may also be included.

The money from a CIC policy could allow you to:

• Cover the cost of treatment, potentially allowing you to seek private medical care to speed treatment up
• Pay off your mortgage or other debts
• Use the lump sum to provide an income, or top up a smaller income.

Like income protection, professional advice should be sought to ensure you understand exactly what you are covered for.

Life insurance could help your family remain financially secure in the event of your death

Life insurance could ensure your family will be financially looked after should you die. At an already difficult time for them, it will help provide some peace of mind for your loved ones to know that they do not need to worry about their financial future.

It can be used to:

• Pay off a mortgage, allowing your family to remain in their home
• Provide a nest-egg for your family that could support your children through university
• Generate an income or boost your spouse’s wage to ensure your family maintains their lifestyle.

There are several different options with life cover, so always seek financial advice to ensure your policy is the best one for you, and to make sure you understand any exemptions that may be included. A financial planner will also be able to advise on the tax position on all of the protection options mentioned.

The later you take out this cover, the more it will cost. Here are three reasons why:

• Like car insurance, it’s all about risk. The longer you leave it the older you will be, which means from the insurer’s point of view, the more likely you are to become ill or die. As this means an increased chance the policy will be claimed against, the premiums will go up.
• Delaying cover also increases the risk of you becoming ill before you are insured, meaning you will not get cover for the condition in the future. If you had taken cover out when you were younger and healthier, you would have had insurance upon diagnosis of your condition, meaning the policy would have paid out.
• It’s not just your health that will be taken into account by insurers. They will also consider your family’s medical history as well. This means that if your parents, for example, are diagnosed with certain conditions before you take a policy out, the insurer is likely to take it into account and therefore may increase premiums on your insurance.

Get in touch

If you would like to discuss ways you could make yourself more financially robust through insurance or to provide a financial “safety net” for your family, please get in touch. You can either email us on hello@ardentuk.com or call on 01904 655 330.

Please note

This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation which is subject to change.