A proposed increase in insurance premium tax (IPT) could make policies substantially more expensive, experts have warned.
Currently, IPT is charged at five per cent on the most common types of cover such as home and
car insurance.
However, it is thought that this could be doubled or even trebled as part of the government's plans to address the UK's troubled financial situation.
Experts have warned this could mean those with home or
car insurance could face a tax levy of up to £135 in the emergency Budget.
It is believed this could have a detrimental effect on the economy, as many families may decide they can no longer afford cover.
The British Insurance Brokers Association said the government should carefully consider the consequences for the millions of people with car and household insurance.
Chief executive Eric Galbraith said: "Increases to tax on premiums will serve only to discourage individuals and small businesses from taking out adequate and appropriate insurance protection. This could result in greater losses to HM Treasury."
A recent study by the Association of British Insurers indicated that contents insurance is one of the first types of cover to be sacrificed during a recession.
