'Be careful what you cut back on' in the credit crunch

With the country seemingly on the brink of a recession, it may be tempting to begin to cut back on a few financial products in order to pay for more pressing things each month.

However, one expert has warned that people should be careful what they decide to ditch, as some things are considerably more important than others.

Graeme Trudgill, technical and corporate affairs executive at the British Insurance Brokers' Association, said: "Some of them like motor insurance are legal requirements and losing the others could be a false economy."

He said car insurance is particularly important because it is a criminal offence not to be in possession of it.

Secondly, most mortgages require buildings insurance to be built in to the agreement, the expert said, so cutting back on this is not an option.

Finally, contents insurance is also an important aspect of cover because unforeseen circumstances such as floods can cause severe damage to properties.

However, Mr Trudgill said, mobile phone insurance is one thing that individuals could afford to drop because most home insurance policies will cover for handset damage or theft.

Also, electrical items such as stereos that people may be purchasing for Christmas should have a year's warranty anyway, so expensive cover is not necessary in this instance either.

According to recent research from uSwitch.com, 42 per cent of Britons have cancelled insurance or pension contributions in a bid to cut costs during the current economic crisis.