Types of insurance

’s unlikely that you’ll need every insurance product on the market, even if you could afford them all. But how do you know whether your hard-earned cash is going on the policies you need the most? The table below is designed to help you make the right decisions for you and your household budget.

Home insurance
Car insurance
Travel insurance
Life insurance, critical illness, income protection and payment protection
Private medical and dental insurance
Pet insurance
Home insurance
What does home insurance cover? Do you need it?
Buildings insurance
Covers the cost of repairing or rebuilding your home if it’s damaged by storm, floods, fire, lightning, subsidence, etc
You won’t be covered for general wear and tear
You’re unlikely to be covered for properties left unoccupied for more than 60 continuous days
Yes, it is a legal requirement if you own your home, plus mortgage lenders normally insist on you having buildings cover.
Repairing your home can be very expensive so buildings insurance could save you a fortune in the long run
You’ll need to read your policy document carefully to check what is and isn’t covered
Buildings insurance – Do you need it?
Contents insurance
Covers your possessions for loss or damage
You won’t be covered for general wear and tear
It usually doesn’t cover properties left unoccupied for more than 60 continuous days
Yes, for most people it’s vital in case your home is burgled or there’s a fire or flood.
You can usually get a new item to replace your damaged or lost one
You can choose to get cover in case you lose items outside your home
You’ll probably need to pay an excess on every claim and your premium will probably rise the following year
Some items are only insured up to a certain limit, so you might need to pay for extra cover for these
Find out more – Do you need contents insurance?
Car insurance
What does car insurance cover? Do you need it?
Car insurance
There are – three types of cover:
Third party – this covers other people (such as your passengers) involved in an accident, or damage to other people’s property, but if your car is damaged or stolen you have to pay for it yourself
Third party, fire and theft – like third party but covers repairs or replacement if your car is stolen or set on fire
Comprehensive – covers everything above and also covers damage to your own car
Yes, you are legally obliged to have at least third party cover.
It protects you against personal injury claims which can run into millions of pounds
Driving without insurance will lead to disqualification from driving and possibly prison
Insurance for young, newly qualified drivers is very expensive
If you need to claim there is often a gap between what the insurer pays out and the cost of replacing your car
Find out more – Car insurance – choose the right level of cover
GAP (Guaranteed Asset Protection) insurance
Covers you if you write off your car – it pays the difference between what your motor insurance policy pays out and either:
What you paid for the car
What you still owe on the car, or
What it would cost to buy the same car new
It only covers you if your car has been labelled a total write-off or unrecoverable
You should only consider it if you owe your car dealership more than your car is now worth.
You don’t need it if:
You consider the cover from your motor insurance policy is sufficient
You’ve an ‘agreed value’ car insurance policy
You’re using a finance agreement that already covers you for the difference between the book price and how much you paid
You got a big enough discount on your car to cover any depreciation
GAP insurance enables you to get a replacement car equal to the one you had
You might not be covered for as much as you’re expecting – for example non-standard extras on your car, or a high excess
Travel insurance
What does travel insurance cover? Do you need it?
Travel insurance
Most cover:
Emergency medical expenses
Personal liability, if you’re sued for damaging property or causing injury
Lost or stolen bags
The costs of cancelling, delaying or cutting short your trip
You won’t normally be covered for a pre-existing medical condition
Yes, it’s a must if you want to be able to afford medical care when you’re abroad.
Most policies provide up to £1 million of medical cover and will fly you home for treatment
Adventure sports, winter sports and any ‘dangerous activities’ will need extra cover
Cover for possessions is often poor value for money
Find out more – Do you need travel insurance?
Life insurance, critical illness, income protection and payment protection
What does life insurance, critical illness, income protection and payment protection cover? Do you need it?
Life insurance
It pays your dependants a lump sum or regular payments if you die
Yes, if your children or partner depend on your income to cover the mortgage or other living expenses.
Check whether you have an employee package that includes ‘death in service’ benefits, if so, you might not need more life insurance or maybe just a top-up
If you’re young and healthy, life insurance is very good value for money – providing high cover at a relatively low cost
It only covers death – it won’t cover you if you can’t work due to illness or disability
Existing medical conditions might not be covered and – if you have a serious health problem – you might not be able to get cover or only at a high cost
Find out more – Do you need life insurance?
Critical illness insurance
It pays a ‘lump sum’ (or some policies will pay an income) if you’re diagnosed with a specific serious illness, for example:
Heart attack
Certain types and stages of cancer
Conditions such as multiple sclerosis
Most policies will also pay out if you’re permanently and totally disabled after an injury or illness
It’s not as important as life insurance but you might need it if you and your family depend on your income to cover the mortgage or other living expenses.
Check whether you have an employee package that provides an income if you can’t work for a long period – you might not need critical illness cover
If you couldn’t support yourself and your dependants if you were too ill to work, then you should consider critical illness or income protection cover
If you can afford it – you can buy a combined life and critical illness policy
A payout can make a big difference when you need it most, for example you could use it to pay off your mortgage
Some cancers and ‘chronic’ conditions might not be covered, even if they mean you can’t work
Health problems you had before you took out the insurance are very unlikely to be covered
Find out more – Do you need critical illness insurance?
Income protection insurance
Pays a percentage of your take-home pay if you can’t work for a while because you’re ill or disabled
It covers most illnesses that leave you unable to work
It doesn’t cover you for unemployment
You should consider it if you can’t rely on savings or employee benefits to see you through an illness.
You’re most likely to need it if you’re self-employed, or you don’t have occupational sick pay or savings to fall back on
Your living expenses and bills should be covered until you can start working again or retire – depending on the term of the policy
You can claim as many times as you need to while the policy lasts
Beware different definitions of ‘unable to work’ this will mean different things in different policies – get advice before buying
You might not get cover if you have existing health problems or a dangerous job
Find out more – Do you need income protection insurance?
Payment protection insurance (PPI), and mortgage protection insurance (MPPI)
Covers your monthly mortgage, loan, and credit card repayments in case you:
Have an accident
Become ill and can’t work, or
Become unemployed
Usually, it won’t cover you:
For pre-existing conditions
If you’re self-employed, a temp or contractor
If you’re retired or unemployed
If you lose your job within 3–6 months of taking out the policy
You probably don’t need it if:
You could get by on your sick pay or redundancy pay
You have enough savings to cover your repayments
Your partner could cover the mortgage and other loan repayments
You’re young, single, in good health, and only have spare cash for basic insurance
It can ease your money problems if:
You’re made redundant and are likely to be out of work for a long time
If you’ve little or no savings and quite a lot of debt
Other factors:
You might have to wait up to 90 days before you can claim
It will only pay out for a limited time (say 12 months) even if your illness or period of unemployment lasts longer
Find out more – Do you need payment protection insurance (PPI)?
Private medical and dental insurance
What does private medical and dental insurance cover? Do you need it?
Private medical insurance
Health insurance reimburses the cost of all or some of your medical bills if you pay for your own healthcare
Basic private medical insurance covers most in-patient treatments (tests and surgery) and day-care surgery. Some policies also cover out-patient treatments (such as specialists and consultants)
It doesn’t usually cover treatment for:
Pre-existing medical conditions
Chronic illnesses such as diabetes, mental health issues and depression
Cosmetic surgery
Routine check-ups
You get free treatment on the NHS, so you only need private medical insurance if:
You think you might need treatment you can’t get on the NHS, like specialist surgery for sports-related injuries, or certain cancer drugs or treatment
You just don’t want to use the NHS and would prefer to stick to private hospitals and clinics where possible
Other factors
You can ask your GP to refer you to a private expert or specialist
If the NHS won’t let you have a scan or makes you wait, you can use your cover to pay for it
You can use your insurance to reduce the time you spend waiting for NHS treatment
It can be expensive, depending on what types of treatment you want to be covered for
Premiums rise every year, and with age, so by the time you’re older and more likely to need hospital treatment, you might not be able to afford the premiums
Find out more – Do you need private medical insurance?
Dental insurance
Covers routine check-ups, as well as the costs of all dental work, including dental accidents and emergencies
It doesn’t cover cosmetic work
If you can’t go to an NHS dentist, or you need to have a great deal of work done on your teeth, dental insurance might be a good idea.
If you need a lot of treatment, dental insurance can provide good value for money
You can normally only start to claim between one and three months after you buy the insurance
Premiums might increase if you make a claim for anything other than a standard check-up
Find out more – Do you need dental insurance?
Pet insurance
What does pet insurance cover? Do you need it?
Pet insurance
Covers the cost of veterinary treatment for your pet
Annual jabs, spaying and neutering are not covered
Optional – if you can’t afford the cost of treatment out of your spare income, you should consider getting insurance.
Most needed if you have a breed of dog or cat that’s likely to cost you a lot in medical care
Veterinary bills are costly and rising all the time – if your pet gets a very serious injury or a chronic illness, pet insurance can be good value for money
Keep up with regular vaccinations or your pet insurance won’t pay out if you need to claim
It’s difficult to get cover for a pet that is old or already has a medical condition

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Car insurance

Young drivers insurance
Black box car insurance
Gap insurance
Cosmetic car insurance
Short term car insurance
Multi-car insurance
Motorbike insurance
Motorbike warranty
Multi-motorbike insurance
Quad insurance
Motorbike breakdown cover
Van insurance
Van warranty
Short term van insurance
Van breakdown cover
Taxi insurance
Car leasing
Car warranty insurance
Breakdown cover
Excess insurance
Caravan insurance
Motorhome insurance
Home insurance
Contents insurance
Buildings insurance
Student insurance
Bicycle insurance
Non-standard home insurance
Holiday home insurance
Mortgage protection
Home appliance warranty
Landlord insurance
Business insurance
Public liability insurance
Indemnity insurance
Life insurance
Critical illness insurance
Over 50s life insurance
Health insurance
Travel insurance
Medical travel insurance
Annual multi trip insurance
Single trip insurance
Pet insurance
Multi pet insurance
Horse insurance
Rabbit insurance
Gadget insurance
Wedding insurance
Payment protection
Income protection insurance
Car insurance guides
Car insurance providers
Home insurance guides
Home insurance providers
Life insurance guides
Travel insurance guides
Car insurance articles
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About the author

Sheena williamson

Sheena Williams is an excellent insurance and cloud consultant.To contact her call on +12034855860