The Office for National Statistics (ONS) has found that 8% of adults have cancelled a financial product such as a pension or dental/life insurance as the cost of living crisis bites.
It also found that a worrying 18% of adults have no savings whatsoever while 7% were unable to pay a bill in the past month.
This has led finance professionals to call on people to seek advice and make sure they are prioritising the right payments.
Scott Taylor-Barr, financial adviser at Carl Summers Financial Services, warned people against making rash cancellations to their insurance.
He said: “Whilst it may seem tempting to cancel insurance coverage to save money, don’t. You will have made your situation a million times worse if something happens and the protection you had in place to support you is gone.
“Speak to an adviser and discuss with them what help the insurer has in place to help you, or what you could do to reduce costs, without getting rid of all of your coverage completely. Something is always better than nothing.”
While Rhys Schofield, managing director at Peak Money, agreed adding that cuts should be made elsewhere before insurance.
“One in 12 adults cancelling a financial product is heartbreaking,” said Schofield. “An increased cost of living puts you in even more of a financial hole if something bad happens and you are uninsured, so insurance is more important than ever.
“Only this week a client of mine received a payout of nearly £6000 for breaking and dislocating his shoulder playing rugby.
“His wife reached out to me to say how it had really taken the pressure off with Christmas round the corner and a new baby imminent.
“Had they cancelled their premiums to save costs, it would have been a different story altogether.
“It worries me that some people will be tempted to cancel the actual essentials before Sky or Netflix but it’s really saddening to see families in genuine dire straits.
“My advice would be, if you really are struggling, seek financial advice before cancelling anything.”
And Chris Sykes, technical director and senior mortgage adviser at Private Finance ltd, shared Schofield’s concerns.
Sykes said: “The fact that one in 12 people are cancelling a financial product is extremely concerning.
“Often in times of recession, things like personal protection products are the first thing people cancel when arguably they are more important than ever during tougher times.
“We find it astonishing how many clients we see who have pet insurance but not insurance for themselves and their families.
“One thing many people don’t consider is the cost of replacing a policy, as if they were to apply for the same cover in five years it will almost certainly be more expensive, as the older you are the more expensive protection tends to be.”
But worryingly the worst could still be yet to come according to Philip Dragoumis: “The report makes for grim reading,” he said. “The effect of falling real incomes is evident as the UK has very negative real wage growth and people are not borrowing more to cover the shortfall.
“The Government needs to roll out legislation quickly to help the most vulnerable otherwise it will be too late. It’s going to be a tough winter and we could see an increase in social unrest.
Amit Patel, adviser at Trinity Finance, agrees for the need for the Government to be involved and has called on his local MP to improve education around finances.
“Sadly, these statistics do not surprise me as countless households are under serious financial pressure.
“Those in deprived areas will have less disposable income as they are either reliant on state benefits or the minimum wage.
“I have spoken to my local MP on several occasions to get a motion tabled in Parliament to discuss personal finance being incorporated into the school curriculum.
“Financial education enhances financial wellbeing and prepares students to understand and manage their incomes as adults,” Patel comcluded.
