What do you think about insurance?
Some people want everything to be insured. And you can certainly find insurance for pretty much anything you can think of. Insurance can bring a peace of mind and a sense of security.
But others are more sceptical. They are reluctant to pay for insurance because they don’t believe that they would ever get any money from it. The small print will always contain a reason to sell you short.
Which is the correct view? Is it worth paying for insurance or would it be just as well to cross your fingers and hope for the best?
Also are certain types of insurance compulsory? Which are these and how do you find the best deals?
In this article we look at seven of the most common types of insurance, what they cover you for, and things to be aware of when looking for insurance.
The seven types of insurance are:
Income protection insurance
The two main types of home insurance are buildings insurance and contents insurance. If you own your own home it is a legal requirement to have buildings insurance.
Many insurers offer combined buildings and contents insurance.
Buildings insurance covers you for repairing any damage to your home, for example fire, floods or storms. But most policies do not cover you for damage caused by general wear and tear. Also be aware that in some cases your property may not be covered by your buildings insurance if for any reason it has been unoccupied for more than 60 continuous days.
So it’s always important to check carefully what is and is not covered by policy. Another thing to watch out for is that many building insurance policies will have an excess added. This is a sum of money that you will have to pay if you are making an insurance claim. If you have a high excess, it may sometimes not be worth putting relatively small claims through your insurers.
Contents insurance covers your possessions for damage or loss, including theft. A good contents insurance policy will replace your lost or damaged item with a new equivalent item.
When taking out contents insurance you need to check whether the policy covers items when you are outside the home, as well as in the home. Also check whether there are any limits on the insurance of single items. If so, you may want to investigate specialist insurance for valuable items.
Car insurance is another legal obligation. If you drive a car you must be insured, otherwise you could be disqualified from driving or even face a prison sentence.
The main type of car insurance is comprehensive insurance, which would cover all the costs if you were to be in a car accident. There may also be optional extras on the policy such as breakdown cover, windscreen cover, courtesy car, and legal expenses.
As well as comprehensive insurance, there are two other car insurance options:
Third Party cover would pay for the costs of any other people involved in a car accident; for example another driver, their car, your passengers. But you would need to pay for your own costs – for example repairing or replacing your car – yourself.
This includes everything just mentioned on Third Party insurance, but would also cover the cost of repairing or replacing your car if it is either set on fire or stolen.
Travel insurance is not a legal requirement, some tour operators will insist you have a policy in place before confirming your travel, particularly if there is no public health service available in the destination country.
Prior to Brexit, you were covered for medical care and emergencies in Europe by the EHIC (European Health Insurance Card). If you have an EHIC and it is still in date, it will still be valid in Europe. If not, you can apply for its replacement – a GHIC (Global Health Insurance Card) – via the NHS website.
However, even with an EHIC or GHIC, it is still wise to have good travel insurance for travel within Europe.
Travel insurance policies vary enormously, so check the details carefully. Some of the areas of cover to look for are:
Covid-related changes, cancellations and costs;
Any other cancellations, delays or shortening of your trip;
Travel disruption such as missed, cancelled or delayed flights;
Emergency expenses, ideally including the cost of being brought home;
Lost or stolen luggage or other personal items;
Personal liability/legal fees, for example in case of accident or damage.
The purpose of life insurance is to support your dependents financially in the sad event of your death. There are various different types of life insurance and payment options.
Three of the most common to consider are:
Lump sum life insurance would pay out a lump sum of money to your dependents should you die, enabling them to manage ongoing living expenses and mortgage/debt repayments.
You can take out a lump sum policy for either a whole life or fixed term basis, depending on your needs.
This is similar to lump sum except that your dependents would receive a regular tax-free income for a set period of time after your death. You can choose this length of time to fit with your needs, for example until your children are likely to be financially independent.
Critical illness insurance can either be taken as a separate insurance or added onto your life insurance policy. It would pay you a lump sum if you either become terminally ill or permanently disabled from a serious illness such as cancer, heart attack, stroke or multiple sclerosis.
Income protection insurance is similar to life insurance but will cover you if you are not able to work and lose your regular source of income.
So for example, if you lose your job through no fault of your own, or if you are ill or have an accident and are temporarily unable to work, an income protection insurance policy would pay you a portion of your normal salary each month.
Most income protection insurance policies will pay out for a set short-term period, usually up to two years. You can also find longer-term income protection policies but they may not cover you if you are made redundant. So check the small print.
We are fortunate within the UK, to have free health treatment available via the NHS. But there are also a wide range of private health insurance policies that you can pay for, which could cover all or part of the cost of most in-patient treatments, day-care surgery and out-patient treatments.
People are attracted to private health insurance for the reassurance of not having to wait a long time if they need treatment, or of being able to access additional drugs or treatments that may not currently be available on the NHS.
Some private health policies will also pay you a cash allowance for each night’s stay in an NHS Hospital, if it’s for treatment that you could have claimed for privately.
If you own a pet, pet insurance is worth considering. It can be expensive, but it means that you are covered for:
Loss or theft of your pet;
Death by illness or injury;
Kennel/cattery fees if you have to go into hospital.
Many pet insurers will pay your vet directly, which can be a lifesaver if your pet has to have expensive treatment. It avoids you having to find the money up front to pay for your pet’s treatment, then the hassle of trying to reclaim it from the insurer.
A key thing to check with pet insurance is whether you have a “lifetime policy”. If you do, this should cover your pet for the duration of its life, no matter how many times you claim for the same condition. Some other policies do not do this, so if your pet has a recurring condition, you may end up having to pay after a certain period of time.
There are several ways to find a good insurance deal.
What most people do as a starting point is to research prices online, perhaps with the help of a comparison website such as:
It’s also worth:
Asking friends for word of mouth recommendations;
Contacting an insurer you are already with for something else to see what they can offer;
Contacting an insurance broker to see if they can get you a good deal, particularly if you have multiple insurance needs.
We hope that the above information helps you to decide which types of insurance you really need, and which you are going to do without for now. But do keep things under review. Just as your personal needs and circumstances change over time, so will your insurance needs.
If you are currently in the situation of facing a financial need that is not covered by any of your existing insurances, do bear in mind that Minty offers low apr loans that may be able to help.