“Insurance – Is it worth it?” is a paid collaborative post with HSBC. With the cost of living crisis, many families are looking to cut costs and many are asking if they should cancel insurance policies. Before you even contemplate it, you really need to understand what each policy covers and how and also if it is a legal requirement. Please remember that I am not a financial adviser just a regular mum, so please take professional advice.
In basic terms insurance is the arrangement by which a company undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium. So you pay a fee and then if the unthinkable happens your insurance company will cover the loss.
Most Insurance policies have an excess, which is the amount of money that you have to pay on each claim. For example with our car insurance, we pay the first £200 of any claim we make. If you are struggling with costs it is worth bearing in mind that with policies you legally have to have like car insurance and buildings insurance your policy provider will be able to discuss costs with you and see if they can make it cheaper perhaps by cutting the cover (if applicable), increasing the voluntary excess or offering an alternative product. If you pay annually, they will be able to swap you to monthly (perhaps with a small additional charge).
Types of Insurance
If you drive you’re legally required to have motor insurance, there are two types, third-party or fully comprehensive. MoneyHelper (formerly the Money Advice Service) has some great information to help in choosing the right level of car insurance cover.
Home insurance is a type of insurance policy that covers your home in the case of fire, flood, damage or theft of contents.
Home contents insurance covers your possessions against fire, theft and other risks, such as accidental damage. It generally covers the cost of replacing your belongings in your home if they are damaged, destroyed or stolen but you do often have an excess that has to be paid each time you claim. You can also get contents insurance cover for accidental damage. Your ‘contents’ are the items you would take with you if you moved home:
- Soft furnishings
- Clothes and jewellery
- Ornaments and antiques
We have had to recently claim on our home contents policy for the first time ever after an incident with a shelf and my mac! Thankfully our policy covered accidental damage and provided a replacement.
If you have outstanding debt on your property all mortgage providers will insist on you having Buildings Insurance as it is a legal requirement. This covers the structure of your home, the physical building (and detached garage) and the fixtures and fittings inside that are unable to be removed such as windows, bathtubs etc. Even if you don’t have a mortgage it is reckless to not have a building home insurance policy.
We had to claim on our buildings insurance due to a heavy snowfall which came off our roof onto our conservatory and broke the roof panels
There are quite a few types of life insurance and an independent financial adviser will be best placed to tell you what will work best for your family. You often pay monthly premiums and it is best to think of life insurance as a long-term expense that you put in place for peace of mind.
- Whole life insurance policy is a life cover policy that is in place until you die. It is a lifetime policy that you pay from the start of the policy for your entire life.
- Term life insurance is a life cover policy that runs for a specified number of years for example 25 year term policy.
- Over 50s life cover is a cover that you take once you are over 50 years old. Often you can take out a much more affordable coverage to ensure your funeral costs are covered.
There is also Critical illness coverage, Terminal illness coverage and you can also get Children’s coverage. You can also get policies which cover both partners in a relationship and pays out to the remaining spouse or named beneficiary.
You can also get lots of other insurance such as pet insurance, health insurance, dental care insurance, renters insurance and motor breakdown coverage. We have what is called a multi-cover policy that covers travel, car breakdown and phone insurance.
Get Quotes or Help
There are lots of Financial comparison sites that can help with quotes but it really does pay to check out new deals around 12 weeks before any renewals are due.
As always it is important to discuss any policies you take out and I recommend talking to an Independent Financial Advisor, to ensure you get the right type of policy for you that offers the correct level of financial protection for your lifestyle and financial goals. It also pays to keep in check as circumstances may change
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