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Buying insurance is probably not something that is always at the front of your mind. The "It won't happen to me" approach is also not uncommon, but ask someone who has needed to make a claim and you will find a different take on the need for insurance!
Ensuring you are adequately insured makes it easier to deal with any unfortunate events that might materialise, and even if nothing happens, you will have benefited from the peace of mind that can be worth the price alone.
Insurance covers you against injury or loss in return for payments, called premiums. Put simply, the higher the likelihood of the event occurring and the extent of loss, the greater the premium. Car insurance is compulsory for driving in the UK, but most insurance is not. In deciding if you need insurance, you need to consider the impact of the worst occurring, and whether you can cope without the cover provided.
So what are the common types of insurance offered in the UK?
- Life Insurance - Pays out a lump sum on death to your dependants.
- Income Protection - Also referred to as Permanent health insurance (PHI) it pays out a monthly sum if you suffer a loss of earnings, if you are injured or too ill to work.
- Critical Illness - Pays out a lump sum if you are diagnosed with a specific illness or condition (e.g. heart attack or cancer).
- Accident, Sickness & Unemployment (ASU) - Pays out a monthly amount for a limited period (usually 12 or 24 months) if you are unable to work due to illness or accident.
- Private Medical - To avoid waiting queues in the NHS you can cover yourself to receive private treatment.
- Home Insurance - There are 2 main types: buildings and contents. Buildings insurance covers damage to your home and its structure, while contents insurance is protection against damage to or loss of your possessions.
- Car Insurance - Pays out a lump sum in the event of your car being involved in an accident. Third party cover protects you against liability to other people and their property. Comprehensive cover also protects you against the cost of repairs to your own car as well as fire and theft.
- Travel Insurance - Covers you against travel related issues, such as holiday cancellations or medical cover abroad.
- Pet Insurance - Similar to Private Medical for pets! With the cost of veterinary fees rising, this is more common than ever.
When applying for cover you will need to complete an application form and it is important to be truthful. If you are not, your claim may be rejected. The legal agreement that rests between yourself and the insurance company is called a policy. Although it won't be a very exciting read, do ensure that you check exactly what is covered to avoid any unwanted surprises later on. Obviously you want to be saving money with lower premiums if possible, but ensure you still have the coverage you need.