Insurance

Do you need insurance?
What is insurance?
Home contents
Buildings insurance
Vehicle insurance
Third party, fire and theft
Excess
No claims bonus
The policy
Life insurance
Travel insurance
Health insurance
Payment protection insurance
Pet insurance
Complaints

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Insurance

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Do you need insurance?

• If you lost something or it was stolen could you afford to replace it?

• If your flat caught fire and everything was destroyed could you afford to start again?
• If you crashed your car into someone else’s how would you pay for the damage?

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What is insurance?

Insurance is a way to protect things against damage or loss.

• You pay a sum which gives you an amount of protection in return according to your policy.

• If something is damaged you make a claim to the insurance company who pays you.

• You can insure many things for varying circumstances.

This unit covers the main uses of insurance.

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Home contents

• You can insure the contents of your home against fire, theft or accidental damage. Most policies give you cover up to a maximum amount such as £15,000.

• You may insure specific items which are worth more.

• Some policies give you cover for your possessions when you take them out of your home. This is useful for items such as mobile phones, cameras and laptop computers in case they are lost, stolen or damaged.

• You can also get cover for damage caused by accidents.

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Buildings insurance

For most of us a home is the most expensive thing we will ever buy.

How would you replace or repair a house if it were damaged by serious accident, such as flooding, a fire or a lightning strike?

• Buildings insurance covers you against these types of hazard.

• Most mortgage lenders expect you to take out some kind of buildings insurance to pay for major repairs.

• Buildings insurance does not cover your personal possessions – that’s covered by home contents insurance.

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Vehicle insurance

Cars, vans and motorcycles are all expensive items and as well as being costly, accidents can cause serious injury.

The law requires that all vehicle owners have insurance to cover against accidents and damage to other people, known as third party.

That means that if you hit a vehicle your insurance company pay for its repairs. The insurance company can also pay out compensation for injury.

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Third party, fire and theft

• Third party, fire and theft insurance gives cover against accidents and injury to other people. It also pays out if your vehicle is stolen or damaged by fire.

• Fully comprehensive insurance gives cover to third parties and also covers damage to your vehicle whatever the cause.

• Insurance policies vary so always check the details of your policy.

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Excess

Many insurance policies require that when you make a claim you must pay an amount, eg £50. This amount is known as the excess.

Check your policy for details of any excess.

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No claims bonus

Many insurance companies offer a discount if you don’t make a claim. This means that if you didn’t make a claim on your insurance during the past year, the amount you pay for insurance cover (known as the premium) for the next year is reduced.

Some insurance policies allow you to make a claim without losing your no claims bonus. This is called a protected no claims bonus. You often have to pay a higher premium for this.

If you decide to move your insurance to another company you can usually take the no claims bonus with you.

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The policy

Your insurance policy is a contract which sets out the details of the cover you are paying for. It explains in detail what is covered and what is not covered as well as how to make a claim.

A printed copy of your insurance policy is usually posted to you. But now that many insurance companies operate through websites you can also read the policy online.

Always check the policy before you accept it so that you fully understand the conditions.

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Life insurance

How would you provide for your family in the event of your death?

If you are the financial provider for your partner and children, you may be concerned about their welfare if you were to die suddenly.

• Life insurance (sometimes called life assurance) pays out in the event of your death.

• Some policies pay out an amount on a set date, which is known as when the policy matures.

• There are a large variety of policies available each with different conditions.

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Travel insurance

You can take out insurance to cover possible difficulties while travelling or on holiday. You can book this when you arrange a holiday or separately. You can also have an annual travel policy.

Travel insurance usually covers:

• medical expenses
• injury or death
• lost, stolen or damaged property
• delays, cancellation and missed travel arrangements.

Some policies don’t cover certain activities such as dangerous sports, so always check when you buy travel insurance what the policy covers.

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Health insurance

In the UK we don’t have to pay for medical treatment provided by the National Health Service. This is because the NHS is paid for by our National Insurance contributions, deducted from our wages.

This means we don’t have to worry about the cost of the treatment which can be very expensive.

You can also take out additional private health insurance which gives you access to treatment by private doctors or dentists. Sometimes private health schemes can offer treatment more quickly than the NHS.

There are several companies that offer private health insurance in the UK. Some have their own private hospitals or treatment centres.

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Payment protection insurance

When you borrow money you can take out optional insurance in case you become unable to make the agreed repayments. This could be for reasons such as redundancy, loss of work, illness or accident.

If you have to make a claim the insurance pays a minimal amount towards the cost of your repayments.

Check the details of the policy to find out when it will pay out.

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Pet insurance

If your pet becomes ill, veterinary treatment can be expensive.

You can take out a pet insurance policy to cover the costs of vets’ bills.

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Complaints

If for any reason you are dissatisfied with the service you receive from an insurer you should complain to them directly. Your policy may have details of a complaints procedure.

If you want to take the complaint further you can contact:
The Financial Services Authority at www.fsa.gov.uk
The Financial Ombudsman Service at www.financial-ombudsman.org.uk

Or visit your local Citizens Advice Bureau.

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Activity: Research

Find out about insurance deals and policies.

Visit an insurance provider’s website and find out:

• how to apply for insurance
• how much the premium will be
• details of the policy.

From the policy give examples of:

• what kind of items are covered or not covered
• what kind of circumstances are covered or not covered

Find out if any extra cover is included such as accidental cover, cover away from home, or out of pocket expenses.

Insurance
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