How much insurance do you and your family really need?

Do you need insurance?

If you Google insurance, it seems that you can buy insurance to cover pretty much everything in life. But what do you actually need?

People have very differing views on the benefit of insurance. Many like the peace of mind that it brings: the feeling that if something bad happens there will be both people and money available to help. Others are sceptical of it, believing that some kind of small print will always mean that you can’t claim money even if you thought you could. 

Whatever your view, there is then the major consideration that insurance can be expensive. Especially when you are paying for something that you will hopefully never need.

So what do you do?

In this article we look at five of the most common types of insurance, what they cover you for, and things to be aware of when looking for insurance.

The five types of insurance are:

• Home insurance
• Car insurance
• Travel insurance
• Life insurance
• Health insurance

We also recently looked at the topic of pet insurance in our article Is Pet Insurance Worth the Money?

• Home insurance

There are two types of home insurance. Buildings insurance and contents insurance. They can be arranged together or separately.

Buildings insurance

If you own your own home it is a legal requirement to have buildings insurance. This will cover you for repairing any damage to your home, for example fire, floods or storms. 

There are three things to be aware of when arranging buildings insurance.

• Most policies will not cover you for damage caused by general wear and tear. So check carefully what is and is not covered by policy.
• Many insurers will add an excess to your policy. This is a contribution that you will have to make if you are making an insurance claim. Depending on the amount of the excess, it may sometimes not be worth putting relatively small claims through your insurers.
• Your property may not be insured if for any reason it has been left unoccupied for more than 60 continuous days.

Contents insurance

Contents insurance covers your possessions for damage or loss, including theft. Many contents insurance policies will replace your lost or damaged item with a new equivalent item.

There are three things to be aware of when arranging contents insurance.

• Check whether the policy covers your property when you are outside the home, as well as in the home.
• As with buildings insurance, there is likely to be an excess on your policy so it may sometimes not be worth going through your insurers.
• Some contents insurance policies set upper limits on the value of single items. So check that this limit is enough to cover all or most of your valuables, or whether you need to pay more to increase the amount of cover provided.

• Car insurance

If you drive a car you are legally obliged to be insured. If you do not have insurance you could be disqualified from driving or even face a prison sentence.

There are three types of insurance cover that you can have:

Third party

If you are involved in an accident, third party cover would pay for the costs of other people involved. For example another driver, their car and also your passengers. But you would need to meet your own costs – for example repairs to/replacement of your car – yourself.

Third party, fire and theft

As above, except that if your car is either set on fire or stolen, the costs of repair or replacement would be covered.

Comprehensive

Comprehensive insurance covers all the costs involved in a car accident. 

Many comprehensive policies also have a range of extra options to choose from, including breakdown cover, windscreen cover, courtesy car, and legal expenses.

• Travel insurance

Now that travel restrictions are being eased you may be planning a trip abroad at some stage. If so, travel insurance is essential. 

If you are travelling within Europe and have an existing EHIC (European Health Insurance Card) this will still be valid if it is in date. If not, you can apply for its replacement – a GHIC (Global Health Insurance Card) – via the NHS website. Either card will entitle you to medical healthcare, including emergencies, when travelling in the EU. However, even with an EHIC or GHIC, good travel insurance is still important. 

When looking for travel insurance, you need to ensure that you are covered for:

• The costs of cancelling, delaying or curtailing your trip.
• Travel disruption such as missed, cancelled or delayed flights.
• Medical treatment.
• Emergency expenses, ideally including the cost of returning home.
• Personal liability, in case of accident or damage.
• Lost or stolen luggage or other personal items.

Look for a policy that includes cover for anything Covid related, for example unexpected quarantine requirements. 

But be aware that most travel insurance policies will not cover pre-existing medical conditions.

• Life insurance

Life insurance is designed to support your family financially in the event of your death. If you are employed, it is worth checking whether your employment package includes any life insurance benefits before purchasing life insurance. 

There are various different types of life insurance and payment options. Three of the most common to consider are:

Lump sum

This type of life insurance pays out a lump sum to your family should you die. You can choose to take out a policy on either a whole life or fixed term basis, depending on your needs. Having this kind of life insurance could give you the peace of mind that major debts and expenses would be covered in the event of your death.

Family Income Benefit

This type of life insurance would pay out a regular tax-free income for a set period of time after your death. This would enable your family to maintain their standard of living until, for example, the children are old enough to become financially independent.

Critical illness

Critical illness can be taken as a separate insurance or added onto your life insurance. It is designed to pay you a lump sum if you become either terminally ill or permanently disabled from an illness such as cancer, heart attack, stroke or multiple sclerosis. 

• Private health insurance

In the UK, health treatment is available for free via the NHS. But you may want to consider private health insurance if you want the reassurance for not having to wait for treatment or being able to access additional drugs or treatments not available on the NHS.

There are a wide range of private health insurance policies on offer, covering all or part of the cost of most in-patient treatments, day-care surgery and out-patient treatments. Some policies will also give you a cash payment for each night’s stay in an NHS Hospital, if it’s for treatment that you could have claimed for privately.

We hope that the above information helps you to make the best decisions about the amount of insurance your family needs. If you are currently facing a financial need that is not covered by any existing insurance, then bear in mind that Loans 2 Go offer short term loans that may be able to help.

Check back here soon for more lifestyle and financial tips from Loans 2 Go.