Insurance

When considering insurance, it’s important to make sure you have the correct level of protection. There are many different types of insurance available, some of which are a legal requirement, some that aren’t relevant for you, and others which may have areas that overlap so you may find you are paying for the same cover twice. The main types of insurance that you will come across are as follows:

  • What does it cover and why do I need it? – This covers damage to your property caused by fire, floods (although if you live in a high risk area you may wish to arrange separate flood insurance) and subsidence etc. Individual plans vary as to what exactly they cover, but most will include damage to fittings such as kitchens and bathrooms, as well as garages, sheds and so on. The contents of your property are not included in buildings insurance.

    If you are renting your property this type of insurance should be arranged and paid for by your landlord, and if you have a leasehold property (such as a flat) the freeholder may have arranged buildings insurance for the whole block, in which case you could already be covered.

    What will it cost? – This insurance is based on what your property would cost to rebuild, so you need to make sure this figure is correct. If you make any changes to your property (for instance a loft conversion) the cost may change. As with any insurance you should shop around to make sure you get the best deal. You might be able to get a bargain if you buy buildings and contents insurance together. Most insurance policies have a standard excess charge which is the amount of money you agree to pay yourself towards any claim – for instance the first £50. If you agree to pay more than this you could get a discount. Remember to check not only prices but what you’re getting for your money – not all policies will offer the same level of protection.

  • What does it cover and why do I need it? – This covers all the contents of your home, such as furniture and electrical appliances. Some policies also cover items you take outside your home such as digital cameras, jewellery and laptop computers. Think about whether you need to get additional cover under your travel insurance for items you take on holiday with you if they are not covered by your contents insurance.

    Items will usually be protected against theft, loss and fire, and you will have the option to pay extra to cover any damage you cause to the item by accident. Some companies have limits on the value of items that are covered under the plan, so if you have an item that is worth a lot, for instance a valuable piece of jewellery, you might need to make sure this is specified on your policy. Some policies offer ‘new for old’ cover, which means they will replace your lost or damaged goods with brand new ones if you make a claim. Others just give you the amount of money they believe the item was worth.

    What will it cost? – This varies depending on the level of cover you go for. Many insurers will offer discounts if your home has security measures such as a burglar alarm and locks on doors and windows. If you share your property with other people who are not part of your family, this could mean your insurance will cost more. Most insurance policies have a standard excess charge which is the amount of money you agree to pay yourself towards any claim – for instance, the first £50. If you agree to pay more than this you might be offered a discount.

  • What does it cover and why do I need it?? – If you own or drive a motor vehicle the law says you must be insured. You can choose to have a higher level of insurance than the legal requirement if you wish. There are three levels you can choose from:

    1. Third party – this is the minimum legal requirement and covers you if you injure someone or cause damage to their vehicle, however it does not provide any protection if you damage your own vehicle.
       
    2. Third party, fire and theft – this provides the same cover as third party, plus protection if your car is stolen or damaged by fire.
       
    3. Comprehensive – this covers all of the above, plus any accidental damage that may happen to your vehicle.

    For more information visit the Direct.Gov website

    What will it cost? – This varies depending on many different factors. Insurers are likely to take into account the type of vehicle you have and its engine size as well as your age, and how long you have been driving. Previously, your gender was also taken into account, however this is no longer allowed due to new legislation on equality. You can reduce the cost by keeping your car in a garage or other off-road parking.

    If you have been driving for a while but never had to make a claim on your car insurance, the company may offer you a ‘no claims discount’. This can help reduce your premiums by a significant amount so is worth looking out for. If you do ever have to make a claim, your insurance costs may shoot back up as you will lose this discount. Some policies offer to protect your ‘no claims discount’ under certain circumstances even if you do have to claim, but usually you’ll have to pay a fee for this, so you’ll need to work out whether it will be worthwhile. Shop around and make sure you find a product that’s right for you.

    Beware of ‘fronting’ – this is when someone who is not the main driver of the vehicle is named as the main driver on the insurance policy in order to lower the premiums. For example parents may name themselves as the main driver for their son or daughter’s car as this will reduce the insurance costs. This practise is illegal and will invalidate your insurance policy – you could even be pursued for fraud.

  • What does it cover and why do I need it? – Life insurance is a form of financial security for your family or loved ones in the event of your death. Depending on what type of insurance you go for, you can get either a lump sum or a regular income paid out in the event of your death.

    Life insurance may be either ‘term’ insurance or ‘whole-of-life’ insurance. Term insurance covers you if you die within a specific period of time as set out in your policy (for instance 10 years, 20 years etc). This is cheaper than whole-of-life insurance, and can be taken out jointly by couples. Whole-of-life policies are more expensive, but will pay out whenever you die, provided you are still paying the premiums.

    What will it cost? – Whole-of-life policies tend to be more expensive than term policies. Whichever type of cover you go for, the cost is calculated based on the risk that the insurer will have to pay out; so for instance if you smoke, have a pre-existing medical condition or work in a job that could be considered high risk, you are likely to have to pay more, and may even be refused cover altogether depending on your circumstances. There are also some cases in which policies may not pay out, for instance if someone has committed suicide this is often excluded if it is within two years of the policy being taken out.

  • What does it cover and why do I need it? – All UK residents are entitled to free healthcare from the NHS, however if you choose to use private healthcare instead, you will have to pay a fee. You may also have to pay for dental care, although if you are in receipt of certain benefits or are in full time education, these costs may be covered for you, so check before considering taking out insurance. If you are not entitled to free care, or feel you would prefer to be treated privately, medical and dental insurance can be taken out to cover the costs of any such treatment that you may require.

    What will it cost? –This varies depending on the level of cover you need, and your age and state of health. If you already have a medical condition which you know will require future treatment, this will have to be declared to your insurer and they may exclude it from your cover. As with all types of insurance, you should shop around to ensure you get the best deal.

  • What does it cover and why do I need it? – Covers your mobile phone against loss, damage or theft. Some may also cover you for any calls made on your phone after it has been lost or stolen, but usually only after you have formally reported it lost or stolen. Whether you decide you need mobile insurance is entirely your decision. It may be worth considering how much your phone is worth, what it might cost to replace and how likely you think you are to lose or break it – if it is worth a lot and you are concerned you may damage or lose it then you may want to consider insurance.

    You might also want to take into account whether you are on a contract or if you use pay-as-you-go to pay for your calls, as this can make a difference to the price you pay if you lose your mobile. Some contract deals  keep you tied in even if you lose the phone, and if your phone is stolen any fraudulent calls made could be added to your bill, while on pay-as-you-go someone can only make calls until your credit runs out, giving you some degree of protection.

    Your mobile could be covered under your home contents insurance policy, so check this before you take out separate insurance. If it’s not covered, it will be worth looking at whether it would be cheaper to add it on to your contents insurance, rather than taking out a separate policy.

    What will it cost? – Costs generally do not depend on how much your phone is worth, your age, sex or anything else that insurance is normally based on. Instead each provider has a set price which they will charge everyone who comes to them for mobile insurance. As always, shop around, and remember the cheapest cover will not necessarily be the best – remember to check what you are covered for and any exceptions that may apply where the insurer will not pay out.

  • What does it cover and why do I need it? – Travel insurance is designed to cover you if anything goes wrong while you are away on holiday. It will usually cover you if you need medical care, if your bags are lost or stolen or if your flights are delayed or cancelled (although there may be exceptions to this depending on your policy, so make sure you check before you buy).

    If you are a UK resident and have an EHIC (European Health Insurance Card https://www.ehic.org.uk/Internet/home.do) you may be entitled to free or reduced cost healthcare when travelling in EU countries. However this is not generally considered a substitute for proper travel insurance as it only covers you if you get ill.

    What will it cost? – You will usually have to pay a premium based on your age, where you are travelling to and any pre-existing medical conditions you may have. Many travel companies have their own insurance which they may try to sell you when you book, however you do not have to buy this if you are already covered by travel insurance or if you prefer to arrange your own cover, so don’t feel pressured if you’re not sure it’s a good deal for you. Always check what is and isn’t covered by your policy, as some circumstances may be treated differently by different insurers.

  • What does it cover and why do I need it? – Pet insurance can be taken out to cover the costs of vets bills should your pet fall ill. Some may also cover the cost of advertisements if your pet goes missing or the cost of putting your pet into kennels if you are taken into hospital.

    Cover may be:

    1. Life-long – will last for your pet’s entire lifetime
       
    2. Mid-level – will cover the lifetime of your pet but only pay out up to a certain amount or for certain conditions
       
    3. Time limited – will only pay out for a limited time e.g. 12 months per condition

    Insurance will not usually cover any routine checks or vaccinations needed by your pet.

    What will it cost? – Cost depends what kind of pet you have (dogs are usually more expensive to insure than cats are for instance) and how old the animal is. Any existing conditions your animal suffers from may not be covered. You can often find a better deal by shopping around, however bear in mind that if your pet has developed a condition since you took out your original insurance, switching may mean that this condition will not be covered by the new insurance.

  • What does it cover and why do I need it? – This type of cover can also be known as ASU (accident, sickness and unemployment insurance) cover, Account cover, or Payment cover. If you take out a loan, credit card, store card, or catalogue credit agreement and afterwards fall ill, have an accident or lose your job then PPI will cover your monthly repayments to make sure you don’t fall into debt problems. You may also want to consider income protection insurance (permanent health insurance) which will help supplement your income if you lose your job or become too ill to work. See below for more info on this.

    PPI will often be offered when you apply for a loan or credit agreement; however you do not usually have to accept it. Shop around and check what features the policy has and what it will pay out under different circumstances. For more information, see http://yourmoney.moneyadviceservice.org.uk/products/insurance/payment_protection.html.

    What will it cost? – Costs can vary. If you take out insurance from the company you are getting your loan from, remember the cost of PPI is not included in the APR you will pay for your loan or credit agreement so you will need to consider the rate separately. If you buy it from the loan company then the cost may be added to your loan, meaning you will be paying interest on the amount, so it may be cheaper to buy your insurance from a separate provider.

  • What does it cover and why do I need it? – Mortgage payment protection insurance is a type of payment protection insurance which covers you if you lose your job or become ill and cannot afford your mortgage payments. It will usually cover you for a set period of time, for instance 12 months.

    What will it cost? – Varies depending on your circumstances. Always shop around to ensure you find the best deal, and consider the level of protection offered by different policies as well as their cost to ensure you find a product that’s right for you.

  • What does it cover and why do I need it? – This is a tax free payment which can replace part of your income if become too ill to work for a long period of time. By law, an employer must at least pay you Statutory Sick Pay for the first 28 weeks that you are ill (although some employers do offer more than this, so check first); beyond this you are likely to have to rely on welfare benefits and any savings you might have, which may not be enough to cover your financial needs.

    What will it cost? – Costs can depend on how old you are when you start the policy, your gender, general health, job (some jobs are considered more risky than others so you may have to pay higher premiums), lifestyle (for instance if you smoke you will pay more) and how long you are prepared to wait to receive your money after you make your claim. This is another reason why it is important to consider what support your employer will offer you, as the longer you can put off taking payments from your insurance plan, the lower your premiums are likely to be.

  • What does it cover and why do I need it? – When you buy a new product, legally it must be of satisfactory quality. To ensure this the retailer or manufacturer will generally guarantee it for a set period, usually 12 months. This means if the product breaks down during the first year in which you own it, it will be covered, and even beyond this you may have a case if you can show the product was not of satisfactory quality when you bought it.

    Extended warranties cover the product after the period covered by the retailer or manufacturer has ended. You can buy these policies either for new products you’ve just bought, or for things you have owned a while, subject to their age and condition. Polices generally cover repair, parts and labour, and some may be ‘new-for-old’ policies, which will replace your item with a brand new one should it be beyond repair.

    What will it cost? – The cost depends on the value of the item in question as well as its age and condition. Policies also provide different levels of cover, for instance some may cover accidental damage or the cost of any frozen food if your fridge or freezer breaks down. This insurance can usually be purchased from the retailer at the time you buy the item or from specialist insurance brokers. Shop around and consider whether you really need this insurance in addition to the legal rights you already have – even though the manufacturer is only obliged to cover the product for a year, the law states that when it was sold to you the product must have been of a reasonable quality, so you may still have a case against the retailer or manufacturer even if the item breaks down after the first year period.