Which insurance policies are worth keeping?

In the second half of 2022, more than three million customers cancelled at least one general insurance or protection policy to save money due to the cost of living crisis. 

According to the latest Financial Conduct Authority (FCA) Financial Lives survey, conducted in May 2022 and again in January 2023, cash-strapped customers are cutting costs by ending cover. But failing to insure yourself for loss or damage could land you with a hefty bill if things go wrong.

Which? takes a closer look at the FCA's findings and reveals the most commonly cancelled policies, plus which cover you should consider keeping.

Compare home insurance deals

Check Which? insurance ratings and compare deals using the service provided by Confused.com

Get a quote

What are the most commonly cancelled policies?

The FCA survey found 37.1 million people had seen their financial situation worsen in the six months to January 2023, while 36.9 million either had no disposable income or had seen their disposable income decrease. The report comes hot on the heels of Which? research that revealed 15% of the population now risk falling off a financial cliff edge and are likely to need further help. 

Unsurprisingly, many consumers are tightening their purse strings, with some reducing their spending by cutting back on insurance cover. When respondents were asked in January if they had cancelled a policy, reduced cover or changed to a cheaper policy to save money due to the rising cost of living within the last six months, 3.6 million people said they had.

The most commonly cancelled policies were for smaller ticket items. Some 27% cancelled mobile phone insurance and 21% decided to end their gadget insurance cover. An alarming 25% axed pet insurance – that's despite figures from the Association of British Insurers showing some treatments at the vet cost thousands of pounds.

Far fewer cancelled car or buildings insurance – 11% and 8% – but worryingly, nearly 23% cancelled life insurance.

Other consumers chose to save money by decreasing their level of cover rather than cancelling, with 3.1 million people taking that decision on at least one of their policies. Car insurance (39%) and home contents and buildings insurance (31%) were the most popular targets for this group.

Which policies are worth keeping?

With the price of insurance on the rise, it may be tempting to skip taking out any cover or only opt for the bare minimum. But while some types of insurance are nice to have, others are essential and failing to get adequate cover could be an expensive mistake. 

Here are three types of insurance you should avoid cancelling, with tips on how to cut the cost of your premium.

Home insurance

If you've got a mortgage, then chances are you had to take out buildings insurance as one of the conditions. This covers the cost of repairing damage to the structure of your property, including walls, windows and roof, as well as permanent fixtures and fittings such as baths, toilets and fitted kitchens. 

The exception is if you live in a block of flats where the building as a whole has a policy paid for through your service charge, or you're renting and it's then the landlord's responsibility for the building's cover.

Even if you don't have a mortgage and own your home outright, it's still smart to take out buildings insurance cover. If your house is damaged or destroyed, the cost of rebuilding could burn a sizeable hole in your bank account.

Contents insurance on the other hand isn’t compulsory, but it covers your possessions for theft or accidental damage. And because a standard policy usually includes electronic devices, such as mobile phones and laptops, it can save you forking out extra for separate mobile phone and gadget insurance. 

Top money-saving tip: examine the policy carefully to ensure you're not paying for anything unnecessary. For example, not everyone needs both building and contents insurance. If you do need both, some insurers will offer a discount when you buy combined cover. 

• Find out more: best home insurance

Car insurance

Legally, you need car insurance to drive, but the level of cover is up to you. 

Third-party insurance is the minimum level of insurance the law allows but only covers damage to other people, their vehicles and property. The next level is third-party fire and theft cover, which as the name suggests, protects you if your car is stolen or damaged by a fire. 

Fully comprehensive cover covers all of the above, plus damage to your vehicle in an accident. Surprisingly, this can also work out the cheapest. That's because third-party insurance is often used by motorists who insurance providers see as risky, such as young drivers, and that pushes the price up.

Top money-saving tips: renewing early and opting for an annual policy instead of monthly could save you hundreds of pounds. Keeping your mileage in check also keeps the cost of cover down. Your occupation can also impact the price. Try tweaking the job title to see if you get a better price. For example, what's the difference between a 'kitchen worker' and a 'chef', a 'writer' and a 'journalist'? But avoid lying about your job, as this is considered fraud. 

• Find out more: best car insurance companies

Life insurance

If you have a partner or children that depend on you financially, then life insurance will pay family members a lump sum that can cover their costs in the event of your death. It's not just about outstanding debts such as a mortgage, loan or credit card, but also major expenses such as university fees or even basics like grocery shopping. 

There are two main types of life insurance: 'fixed term' only pays out if you die during this time, while 'whole of life' pays out no matter when you die, provided you have kept up your premiums. The latter option, however, is more expensive.

Depending on your situation, you might want to have more than one life insurance policy. For example, you can take out a decreasing term policy to help your loved ones pay off a mortgage, and an increasing term policy to leave a lump sum for them to cope with other costs. 

Top money-saving tips: everyone's circumstances will be different, but be careful not to over-insure and pay for more cover than you need. Also, the younger you are, the cheaper the policy, so take out life insurance as early as possible. Plus, if you can prove that you are leading a healthy lifestyle – for example, quit smoking and exercising regularly – you may be able to convince a provider to cut the cost of the premium.

• Find out more: how do I buy cheap life insurance?

Member exclusive ending soon: get cover - and a £50 gift card

Choose life insurance and/or income protection cover via LifeSearch and get a £50 John Lewis gift card. Offer ends 19 June 2025.

Get a quote

Policy must be active for 90 days before gift card is issued. T&Cs apply.

Whatever the insurance, always shop around

Whether you are renewing or buying a new policy, it's always worth shopping around.

Price comparison sites that allow you to view multiple insurance quotes at a glance are a good place to start. The main ones for insurance are Compare the Market, Confused.com, GoCompare and MoneySuperMarket. 

Once you've found a deal that's right for you, check out our recommended providers. We've surveyed customers to find out how they rated their provider to reveal the best and worst insurers for home and car cover. For tips on keeping the cost of life insurance down, read our guide on buying cheaper cover.

Which? Limited is registered in England and Wales to 2 Marylebone Road, London NW1 4DF, company number 00677665  and is an Introducer Appointed Representative (FRN 610689) of the following:1. Inspop.com Ltd for the introduction of non-investment motor, home, travel and pet insurance, who are authorised and regulated by the Financial Conduct Authority (FCA) to provide advice and arrange non-investment motor, home, travel and pet insurance products (FRN310635). Inspop.com Ltd is authorised and regulated by the Financial Conduct Authority (FCA) to provide advice and arrange non-investment motor, home, travel and pet insurance products (FRN310635) and is registered in England and Wales to Greyfriars House, Greyfriars Road, Cardiff, South Wales, CF10 3AL, company number 03857130. Confused.com is a trading name of Inspop.com Ltd. 2. LifeSearch Partners Limited (FRN656479), for the introduction of Pure Protection Contracts and Private Health Insurance, who are authorised and regulated by the FCA to provide advice and arrange Pure Protection Contracts and Private Health Insurance Contracts.  LifeSearch Partners Ltd is registered in England and Wales to 3000a Parkway, Whiteley, Hampshire, PO15 7FX, company number 03412386.3. HUB Financial Solutions, for the introduction of equity release advice, who are authorised and regulated by the Financial Conduct Authority (‘FCA’) to provide advice and guidance on financial products for those who have retired or are approaching retirement (FCA Firm Reference Number: 455713). HUB Financial Solutions is registered in England and Wales to Enterprise House, Bancroft Road, Reigate, Surrey RH12 7RP, company number 05125701.4. Alan Boswell Insurance Brokers Ltd (FRN 301), for the introduction of non-investment landlord insurances, who are authorised and regulated by the Financial Conduct Authority to provide advice and arrange insurance contracts. Alan Boswell insurance brokers Ltd is registered in England at Prospect House, Rouen Rd, Norwich NR1 1RE, company number 02591252.Other financial services:Mortgage service provided by London & Country Mortgages (L&C), Unit 26 (2.06), Newark Works, 2 Foundry Lane, Bath BA2 3GZ. London & Country are authorised and regulated by the Financial Conduct Authority (registered number: 143002). The FCA does not regulate most Buy to Let mortgages. Your home or property may be repossessed if you do not keep up repayments on your mortgage.We do not make, nor do we seek to make, any recommendations or personalised advice on financial products or services that are regulated by the FCA, as we’re not regulated or authorised by the FCA to advise you in this way. In some cases, however, we have included links to regulated brands or providers with whom we have a commercial relationship and, if you choose to, you can buy a product from our commercial partners. If you go ahead and buy a product using our link, we will receive a commission to help fund our not-for-profit mission and our campaigns work as a champion for the UK consumer. Please note that a link alone does not constitute an endorsement by Which?.