Philip Holland Financial Independence financialindependence

Yes, things are getting financially tighter out there as the credit crunch is starting to bite.

Some struggling families are starting to cut back on their life insurance cover to free up money. This is a dangerous move for many and should be discussed in depth before any decision is made.

There are two main reasons why this could be a disaster for your family:

1. No cover

Obviously if you cancel your life insurance you will no longer be covered. Imagine if then you needed it, what sort of extra financial pressure you and your family will be under.

2. Can't get cover again

If your health changes during that period you may find you are no longer able to get insurance or that the terms the insurance companies are prepared to offer you may be worse that your original policy. This can have a significant impact on protecting you and your family.

At the end of the day for many people insurance is a necessity and not a luxury. The availability of easy debt during the recent years has created a dependence on servicing that debt. Now more than ever the need to protect your ability to both service the debt and protect your income is more important.

So if you need to review your insurances make sure you think about the larger picture. Think about why you took it out in the beginning and the impact it would have to you and your family if you did not have it.

Make sure before you make any changes to talk to your broker about the ways to reduce your premiums without loosing too much cover or putting yourself in a worse situation.

Philip Holland is the managing director for the Financial Independence group, Tauranga's leading specialist insurance and mortgage advisers. A Disclosure Statement is available free of charge on request. The opinions stated in this article are those of the writer and should not be taken as specific advice.