10 must-have financial products
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1. CURRENT ACCOUNT
Although you don't have to have a current account, managing your money without one is very tricky. Few employers pay cash, and you'll also find paying for things like utility bills and insurance problematic.
Beware of paying a monthly sum for a 'packaged account', however, as these are by and large a waste of money. The general rule is if you think you'll use three or more of the benefits it could be worth the money. Otherwise, it's unlikely to be.
Compare the best current accounts
2. TRAVEL INSURANCE
"Travel insurance is a must-have if you go abroad," says Peter Staddon, head of technical services at the British Insurance Brokers' Association.
"If you have an accident or fall ill on holiday your bills can be huge if you don't have travel insurance." Look for at least £1 million of medical cover on European policies, and double this if you're heading to the US.
Be sure to check the small print if you are going on a more exotic break, or if you are going to take part in any adventurous activities. Another top tip is to get insurance that covers you for scheduled airline failure, this means any flights that are not part of a package deal will be covered. (Package failures are already covered under the ATOL (Air Travel Organisers' Licensing) scheme.
The dos and don'ts when taking out travel insurance
3. CREDIT CARD
Although it's possible to run up significant debts with a credit card, Brian Brown, head of research at Defaqto, says your lifestyle could be seriously hampered without one. "Hotels often insist on a credit card and most car rental firms will ask for a credit card to secure a booking," he explains.
Also, credit cards can help build or repair your credit rating, but only if used responsibly and paid off on time each month. In addition, credit cards can be useful for spreading the cost of large expensive items. If this is the way you are going to use your plastic look for a card with 0% interest on purchases.
4. CAR INSURANCE
If you drive a car you're legally obliged to take out car insurance. As a minimum, you'll need third-party cover to pick up the tab if you injure someone or damage their property, and most motor insurers package this with fire and theft cover.
Comparison websites are a great tool for finding the best car insurance policy. Check out uswitch.com, comparethemarket.com and confused.com. But remember these are not comprehensive and some insurers are not included.
Read our five-minute guide to car insurance
5. BUILDINGS INSURANCE
Many mortgage companies will insist you take out buildings insurance with your mortgage to protect the value of their security – your home - in the event of a fire or another disaster.
However, even if it's not a requirement or you don't have a mortgage, your home is likely to be one of your biggest assets, so it's worth insuring it.
6. PENSION
This is not strictly a must-have product as there are plenty of other ways to save for your retirement, but with tax relief available on your contributions and possible contributions from your employer, it's well worth taking advantage of this savings vehicle.
7. ISA
Again, you can live without an ISA, but if you have any savings or investments the tax benefits of an ISA mean you'd be mad not to stick them in one.
Read our round-up of the best cash ISA rates
8. WILL
Dying without a will means your estate will be divided according to the rules of intestacy – which won't always be how you intended.
"A will lets you share your estate according to your wishes and can be useful for inheritance tax planning purposes," says Andrew Hagger, spokesperson for moneynet.co.uk. "Consider putting one in place as soon as you've built up any wealth."
9. CONTENTS INSURANCE
You don't need to take out contents insurance, but the risk of going without could outweigh the cost. "You have to consider what would happen if the worst did happen – a fire or burglary, for example – and you had to replace all your possessions," says Brown. "For most people, it's well worth having."
Some contents insurance policies will also cover you when you're out and about. Check to see if your mobile phone or handbag can be included, for example, and cut back on paying extra to cover these items.
10. LIFE INSURANCE OR INCOME PROTECTION
Once you have financial dependants, such as a partner or child, it's important to protect them by taking out a life insurance plan that will provide them with a lump sum or regular income if you die. Premiums start from as little as £5 a month.
If you haven't any financial dependants, income protection may be a more appropriate product, enabling you to protect your income if you're unable to work due to an accident or ill health.
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Say a prayer for those who eran money for a living through employm,ent and self employment if they have not taken steps to ensure their income is insured if they go off work ill - whatever the cause - income protection - also known as PHI - is the essentail building block for anyone in these categories.
Some employers may cover you for 6 months full pay then 6 half - but then what? Google ESA - employment support allowance - a pitiful non guaranteed amount.
Make sure if you buy income protection its to your retirment age 0 up to 70 and any insurer pays out on own occupation basis and has guaranteed (non reviewable) premiums. As to see their claims history and especially where they did not pay out!
If you are in a high risk manual job then you may have to pay a lot or be inelgible. Pre-exisiting health conditions not usually covered.
If you have people who rely on you and are dependant upon you - for life cover - Family Income Benefit (FIB) is cheap and replaces your income to household if you are dead - make sure you write the cover in Trust though as waiting for Probate (Confirmation in Scotland) will slow up the pay out. Premiums can be good value - if you smoke or have health issues the premium may cost more.
Seek expert independent financial advice from a Certified/Chartered adviser and avoid the High Street banks/building societies. IFAS only had 1.5% of all industrty complaints in first 6 months of 2011 so are better than most .
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Just watch how much an independant advisor charges and use them just for initial advice as their management fees for just,in some cases keeping hold of your policies can be frightening.
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I've used financial advisers three times. Once I could have done as well without the advice, once I broke even and once I lost money.
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The kindest thing you can do for your family is write a will.
Administering an estate without a will takes longer and usually costs a lot more-do you really want to be remembered by your family as having left them a bunch of work, annoyance and hassle?
Whilst you are about it, make sure that all life insurances are written "in trust". This keeps the proceeds out of your estate and thus payable promptly. I've never heard of an insurance company that charges for this, and it usually just needs a quick email or telephone call, followed by filling in a simple form.
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