Home insurance: To cover or not to cover
It's official, insurers are getting worried.
Because it has emerged that in a desperate bid to save money a staggering 22 per cent of us are ditching home contents insurance.
What's more, 17 per cent of Brits have not renewed their buildings insurance cover in order to reduce their household outgoings.
It's a set of statistics that has been described by one insurer, Zurich, as "alarming" and the firm has proclaimed its concern at this turn of events.
In fact the figures, which were published by the Association of British Insurers (ABI) are not just causing disquiet among the people who make money selling these products.
The ABI itself said these were "disturbing" findings.
And Lord Turner, the chairman of city watchdog, the Financial Services Authority (FSA) has also expressed unease at how they demonstrated the negative affect the recession had had on insurers.
But for those families and individuals trying to make ends meet the profit margins of the big insurers are of no concern. For them it's simply a case of keeping their heads above water and they all seem to have their own very valid reasons for failing to insure their home.
Tom Robson, a father-of-one small child, said: "I've never had contents insurance as I don't see the point. My wife and I have just had a baby and what with the recession we are pushing our budget to the limit as it is.
"That extra £30 a month I would pay on contents insurance is money that could go on a month's worth of nappies or the gas bill.
"I have savings so I would just dip into these if anything happened to my possessions."
Refusing to be defeated, in their own desperate bid to claw back customers, many of the insurers are starting to offer deals on their products.
Sainsbury's home insurance is one of the many providers which is now offering discounts for customers who take out both buildings and contents insurance together.
In a recent bout of publicity for the deal manager of Sainsbury's Home Insurance, Joanne Mallon, said: "We spend thousands of pounds each year running our homes and have often invested even more money on furnishings and decorating. Yet, so many people are putting this investment at risk by cutting back on their home insurance."
And these promotions seem to be paying off.
Liz Geary, a student midwife and mother-of-two, has taken advantage. She managed to reduce her premiums by almost 50 per cent by opting for a joint contents and buildings insurance plan.
She said she refused to ditch her home insurance, describing it as a "necessary evil".
"For the sake of £25 a month," she said, "if something did happen I would not have the thousands to replace what could have been broken or stolen.
"With shopping around I have managed to get a good deal with a combined product which has brought my premiums down to half of what I was paying with two separate policies," she added.
Not everyone wants to go down the combined insurance route. Tenants, and people who live in flats controlled by management companies, do not require their own buildings insurance policies.
For these people, simply making an effort to scour the market for the best deal can pay off.
Ms Mallon said: "The recession is having an impact on nearly everyone. However, there are some great deals to be had by shopping around."
The rising prominence of price comparison websites gives people a platform to assess some of the deals on the market.
However, they do not cover every single policy available so it's still worth trying a few sites and making some of your own enquiries.
And anyone thinking about being creative with the truth when applying for a policy by leaving out vital details in a bid to make premiums smaller should think again.
Insurers say this is a completely uneconomical way of saving money as it can result in claims being rejected.
Simon Warsop, director of pricing at Aviva, said as the nation feels the pinch more and more people think they can get away with this.
He said: "The whole point of insurance is to cover the costs for a potential future loss, so running the risk of invalidating your insurance by knowingly providing false information is a false economy.
"Honesty is definitely the best policy."
There are ways, however, to reduce your policy without being dishonest. According to Zurich Insurance if you call your insurer you may be able to reduce your cover and therefore your premium.
This will help, particularly, people who have not reviewed their insurance for a while as there may well be contents which they no longer own. Or they might have recently installed a better security system in their home.
It's certainly worth a phone call.
But, for anyone considering following in the footsteps of the 22 per cent who have cancelled or failed to renew their contents insurance, or indeed the 17 per cent who did the same with buildings insurance, the message is clear.
Having no insurance could be financially riskier in the long run and a short term gain could end up being a long term loss.
In fact, the ABI said it could leave many families even more exposed.
Stephen Haddrill, the director general of the ABI, said: "Cutting back on insurance protection is a false economy. In these uncertain times, insurance provides a vital financial safety net to steer individuals, and families through the recession, as well as helping to provide long-term security."
He added: "Ditching insurance or reducing your cover must only be a last resort."
And Mike Quinton, managing director of Zurich's direct business insurance in the UK said cancelling buildings insurance could be disastrous if the worst happened.
He said: "In the last few years we have seen major floods and storms, and even tornados and earthquakes here in the UK. Insurance is there to put you right should these unfortunate events affect you."
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