The axiom that everyone cannot be wrong at the same time may be correct but it can be misleading too. It is particularly misleading where everyone chooses an option that seems cheaper but in the end turns out to be a lot more expensive than initially thought.

Saving money

The current recession has exposed a number of instances in which people’s bids to save money have turned out to be false economies. Initially, insurers were alarmed that many people were finding it easier to strike life insurance policies off their priority list. The fear then was that many were leaving themselves and their family exposed to the danger of struggling financially without them as they pushed life insurance to the bottom of their priority list. As insurers reminded customers about the danger, the situation only changed very little.

With the economy sinking further into crisis other types of insurance policies began to suffer a similar fate. Car insurance has always been expensive and is an area where most drivers are always looking to save money. Although driving uninsured is illegal the estimated numbers of unisured drivers have risen, meaning that law abiding drivers with insurance policies face higher premiums. Another thing which car insurers have noticed is that they are seeing more and more claims, including many bogus ones.

Personal injury and whiplash claims rose dramatically as some people, desperate for money during the recession, turned to fraud, slamming insurers with fake claims. A man was last month convicted of faking several car accidents, with the help of about 1,000 accomplices, and making fraudulent claims. In light of increasing insurance premiums and job losses, many customers are cancelling their insurance policies to save costs as their prospects are looking more uncertain.

Risky travellers

There was also the issue of increasing number of travellers from the UK heading off abroad without travel insurance. While this continued to pose consular problems for UK embassies abroad, the travellers were themselves left facing increasing danger in the event of delayed or cancelled flights, the loss of or damage to luggage and accidents resulting in an injury or death. Despite it being a habit for some to take risks by going away without insurance, for many others cutting travel insurance felt like the only option to save money on their holiday.

Wrong move

What many people are not acknowledging is the fact one wrong move could make all other actions invalid. A typical example is where homeowners choose to cancel their home insurance policies with the aim of saving money only to realise that they need something to fall back on after a burglary attack or a fire incident.

In the same vein homeowners that decide to axe building insurance, a legal requirement for mortgaged homes, are only rendering their mortgage contract invalid and this could really be problematic.

The main concern here is that up to one million people in the UK have been found by a study to have cancelled their home insurance policies or building insurance cover. This act, we must realise, is a false economy and we may sadly find out when it’s too late that one million people got it wrong all at once.

The plan many of us may have in mind, maybe, is to cancel a policy and save money now and then have it back when things get better. But homeowners could still save money and keep their home insurance policies intact. With so many offers from home insurers on the market one could save money by considering which offer best serves their interest vis-à-vis the value and cost.

Remember, the best cover may not be the most expensive one. One may need to just shop around to find one that combines both a high quality and low price.