Life is full of exciting milestones like buying a house, buying a car and travelling abroad! But these things are expensive and carry risk so it’s important to get insurance and protect yourself against financial losses. In this article, we help you understand what insurance you need to safeguard yourself at important times.
What is insurance?
Insurance is a useful tool for protecting yourself and your family. Insurance is a contract in which you receive some financial protection or reimbursement against losses from an insurance company. There are lots of different types of insurance policies which will cover different losses.
How does it work?
When you take out an insurance policy you pay premiums to your insurance provider, which tend to be charged on a monthly or annual basis. Insurance companies pool this money together from numerous people with similar risks. If you then experience loss you can make a claim to your insurance provider and draw on this pool of money to reimburse you. This may mean that you do not have to pay the full cost of medical bills or replacing valuables. However you have to check your policy carefully: you will only be able to claim on losses that are covered by your policy. Additionally, you may pay a premium for a long time and never actually need to make a claim!
Four scenarios when you might need insurance:
- When you move house
Moving house can be a stressful time, but don’t forget to insure your belongings. You may want to get contents insurance which covers the belongings in your home. Depending on which policy you choose you can be recompensed if certain items are damaged or destroyed. Contents insurance is optional but it can protect you against the loss of valuables to theft, damage or flooding. If you are actually buying your new home then you will need to get buildings insurance. Whilst contents insurance covers your personal belongings, buildings insurance covers the cost of damage to the structure of the property. You can also get combined home insurance policies which provide both buildings and contents cover.
- When you buy a car
When you buy a car you will need to get car insurance; it is actually a legal requirement for all motorists to insure their cars. Car insurance provides financial protection in the event of an accident or incident which injures others. There are three main policies to choose from, all of which offer you different levels of protection. Third-party only is the minimum legal coverage required by motorists in the UK and covers damage to another vehicle or property or injury to another person or animal. Third-party, fire and theft (TPF&T) policies include third-party coverage but also fire damage, theft of your vehicle and damage to your vehicle during theft. You can also get a comprehensive policy, which includes all of the above plus medical expenses and accidental damages. You should choose the policy that is right for you and will offer you the amount of protection that you need.
- When you go abroad
When travelling abroad, you should take out the right travel insurance. There are lots of policies which cover different medical treatments, so make sure to check the details carefully and consider what exactly your policy covers. You may already have travel insurance, but make sure to check what it covers before you go away. Think about what activities you will be doing; if you are going on a sports holiday or a skiing holiday you may need to take out specialist insurance to cover you. If you become unwell on holiday and require treatment abroad, the costs can be extremely expensive. If you had an infection and were treated in the USA and needed new flights back to the UK, Gov.UK estimates the costs to be up to £100,000. It’s important to check what medical emergencies and treatments your travel insurance will cover.
- When you get a pet
Whenever you buy a new pet, they become part of the family. Just like us, they can get injured or unwell, and treatment can get very expensive. In 2018 pet insurers paid out over £785 million to cover expensive vet bills. You can get cheaper cover, however these tend to have monetary limits for each condition and per condition policies that can make it difficult for your pet to be covered for that illness again. If you have a pet that’s susceptible to specific disorders or illnesses it may be worth looking into a lifetime policy. Although more expensive they can offer more coverage.
These are just a few of the instances where you may need to buy insurance; check out our self-assessment quiz to find out what other kinds of insurance you may need.
Image by Erik @ Unsplash