The debt trap

Friday, May 11 2018

Personal debt levels are rising. According to the latest figures published by the Money Charity, the total value of outstanding personal debt in the UK has increased over the past 12 months to reach a staggering £1.576 trillion. Breaking this down, it means that the average UK resident currently owes just over £30,000 (including mortgages), which is 114% of the typical annual earnings for the UK.

Rising debts

The upward trend is showing no signs of slowing either. The Office for Budget Responsibility’s most recent forecast predicted that household debt will reach £2.296 trillion by 2022.

While many manage their debt levels, it can be more of a problem for others. Unfortunately for a growing number of people, debt can spiral out of control. Citizens Advice Bureaux in England and Wales dealt with over half a million enquiries about debt problems in January alone. 26 people a day are declared insolvent or bankrupt – the equivalent to one person every 6 minutes and 13 seconds.

And for those with bad credit, the problem doesn’t end there. If you have a County Court Judgment(CCJ) or an individual voluntary arrangement(IVA) or have been declared bankrupt, you could find it difficult to get insurance to protect your personal possessions or home.

What do insurers think?

Mainstream insurers often consider a low credit score, CCJ, IVA or bankruptcy as a high-risk matter and will decline to offer cover or simply quote an exorbitant premium, reflecting their view of the risk presented. And if they do offer cover at an affordable rate, they may still refuse the option for monthly payments and instead only accept payment of the annual premium in full – something that those in financial difficulty are likely to find impossible to do. Now you might be tempted to hide your financial difficulties when applying for a new policy or at the point of renewal – but this is a very bad idea.

Should the insurer become aware of the true picture, they could void the policy altogether which basically means that they treat the policy as though it had never existed. And insurers do share information on instances of policies being voided, which could make it even harder further down the line to find a policy. Bottom line is that lying to an insurer to get a cheaper premium isn’t just a white lie and you’re unlikely to get away with it.

Declare your debt

Unfortunately, unlike criminal convictions which class as being spent after a certain period, you will need to declare previous financial difficulties no matter when they occurred. And you’ll also have to provide information if anyone who normally lives with you has a poor financial history.

While this might all sound like doom and gloom, help is at hand.

We specialise in covering people who have been turned away by other insurers to their financial history. Our website allows you to quote and buy online, avoiding the need to go through your private financial details over the phone. And we over monthly payment options wherever possible to help you spread the cost of covering your valuable possessions and the roof over your head.

To find out more or to get a quote, click here to get started!