Insurance is an essential part of everyday life, protecting you and your belongings in case of emergencies and giving you peace of mind. There are a few different types of insurance available, and whenever you look to take out a policy for any of them there are a lot of things to consider.
Wish you’d been taught this in school? Don’t worry – loads of us feel the same! That’s why we’ve put together this ‘Life Skills‘ blog post series, giving you the information that you really need on a day-to-day basis.
We’ve created this guide to give you all the facts you need about insurance. Take a look through our advice to go from clueless to clued-up in no time at all!
What different types of insurance are there?
There are four key areas of insurance:
Are these compulsory?
If you are purchasing a car, then you are required by law to have an insurance policy which has at least third party cover.
Home insurance broadly is not legally required; however, it is a condition of many mortgages that you take out buildings insurance. If you are a landlord letting out the property to tenants, then it is your responsibility – not theirs – to take out a policy.
If you are renting the property, check with your landlord or letting agent whether or not a buildings insurance policy has been taken out. It is also a good idea to to take out a contents insurance policy.
Life and travel insurance policies are not a legal necessity, but can be greatly beneficial – especially travel.
What is home insurance?
Home insurance ensures that you are covered in the event of anything happening to your property, whether that’s theft of your possessions, or damage – either man-made or natural. It is not designed to cover general wear and tear of a property, but anything unexpected that could cause damage or loss, such as a fire, burglary, or flooding.
There are two main types of home insurance, and cover can be purchased together or as a standalone policy:
- Buildings insurance
- Contents insurance
Buildings insurance covers the actual building itself, in the event of fire, flood, or storm damage. It also covers unexpected damage to permanent fixtures, including plumbing, wiring, and the roof.
Contents insurance provides cover for the goods within your property, which protects you in case of such things as flooding or theft.
Halifax recommends insuring your contents even if you don’t think you have much that’s worth insuring:
“You might think you don’t own many personal possessions yet, but it is surprising how much items like smartphones, tablets, games consoles, laptops, TVs, and even clothing can add up.
“Contents insurance will cover the cost of repair or replacement should the worst happen. It is worth considering contents insurance that includes cover for items carried outside the home as well as kept inside. This can be added on to most policies.
“Not all home contents policies are the same, and the cheapest may not be the best option for you, so look at what the cover includes and don’t just buy on price. Standalone cover for gadgets such as mobile phones may be costly, and can often be included as an add-on to a contents insurance policy.
“Keep receipts and photographs of any expensive purchases, such as laptops, on a device away from the home, perhaps on your parent’s computer, as this will help if you ever do need to make a claim.”
What is car
insurance protects you and any named drivers in the event of
driving-related incidents, damage, or injury.
The cost of your policy will depend on how likely your
provider believes it is that you will need to claim: the lower the risk you
pose as a driver, the lower the cost of your policy.
This risk is calculated using a range of factors, including
but not limited to:
- your age
- your occupation
- your address
- your vehicle
- any pre-existing medical conditions you may have
- how frequently you drive and how many miles you will
cover each year
- and any previous driving convictions you have been
Should you be involved in a driving incident, your first port
of call is your insurer. They will discuss with you the appropriate course of
action – this will vary depending on the nature of the incident and your
culpability – as well as how to claim on your policy for repairs, whether for
your car or that of another involved party.
insurance provides financial protection for your family, loved ones,
and dependents in the event of your death.
You pay a monthly premium, and if you die then your nearest
and dearest will be able to claim for the payout of your insurance.
This kind of policy is normally taken out if you have
financial burdens over a prolonged period of time, such as mortgage repayments,
or ongoing bills, such as tuition fees at a school.
The amount of time you wish to be covered for is called the
‘term’. You can determine how long you want your term to be, whether you need
to ensure your mortgage gets repaid in full, or that your family is supported,
for example, until the children come of age and/or move away from home.
There are two variations of policies available:
- Level cover: the amount you pay each month stays the
same, and the amount of money that can be claimed in the event of your death
also remains the same throughout the duration of the term.
- Decreasing cover: the amount you pay each month still
stays the same – although typically at a lower premium to level cover – and the
amount that can be claimed decreases over the length of the term.
When going abroad, it is wise to take out a travel insurance policy
to cover you in a variety of circumstances, including but not limited to:
- your flight provider or hotel going out of business
during your stay
- your flight being cancelled or delayed
- unexpected illness during your trip and associated
- natural disasters that affect your trip
- and the loss or damage of any items during the flight
or while you are away
While this isn’t legally compulsory, it is a sensible thing
to consider when going away.
Additional extras can be arranged with your provider for
further fees, which is wise if you are going to be engaging in extreme sports
while you travel.
The cost will depend on how long you are going for, which
country you are visiting, your age, and the nature of any pre-existing medical
conditions you may have.
State your medical circumstances truthfully when getting a
quote for your policy: failure to do so could put you at risk of not being able
to claim in the event of illness during your trip.
How can I
find the cheapest option?
Shopping around is the key to success here. Comparison
websites are a good start, but remember that many insurance providers will not
feature on them, so do a thorough search across a variety of sites.
You may also be able to get a better deal by visiting
insurance providers in person or calling them to discuss the specifics of the
cover you are looking for. This may allow them to create a tailored package
that isn’t available online, helping you save money and get the exact policy
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