Five essential insurance products

Do you consider yourself a risk taker?

Your answer may determine your attitude to insurance and whether you think it is an absolute must, sensible or a big con. Insurance is a multibillion pound business - more than 1,000 companies are licensed to offer general insurance in the UK, according to the Association of British Insurers (ABI), selling dozens of different types of policies that offer protection for everything from identity theft to erupting volcanoes.

The ABI estimates that the average household spent £1,068 on insurance in 2009. However, cases of policies not paying out when they should and the £8 billion scandal surrounding the mis-selling of payment protection insurance for loans and credit cards, have led some to wonder whether it isn't all just a huge waste of money.

"The array of insurance products out there reflects the needs of consumers. They are made in response to something - for meeting needs, not creating them - and the range simply reflects that life has become more risky," says Malcolm Tarling, ABI spokesperson.

Pete Harrison, insurance expert at comparison website, says: "There are some essential policies everyone should have: car, buildings if you are a homeowner,travel if you go away and income protection if you have dependants - everything else depends on your lifestyle, attitude to risk and what you can afford." So, what do you need?



This is a legal necessity and well worth the cost of a policy, as ABI figures show that almost as much was paid out in claims (£10.3 billion) as was paid by car owners in premiums (£10.7 billion) in 2010.


Most homeowners have to take buildings insurance out as a condition of their mortgage. Nonetheless, it's a no-brainer. An average fire claim costs £7,900 and a claim following a major flood between £20,000 and £40,000.


This type of cover would protect you should you fall ill or become injured and unable to work. It is essential for anyone of working age.

As Matt Morris, spokesperson for insurer LifeSearch, says: "People are far more likely to become long-term ill than to die during their working life and state and employer sick pay will not enable you to maintain your standard of living long term."


Of secondary value to income protection but still important if you have a partner or children who are dependent on you as it ensures they will receive either a fixed payout on death or a regular monthly income.


This cover is vital. Without it, you could receive a bill for thousands of pounds should you fall ill abroad.

For example, an air ambulance call-out on the east coast of America costs around £35,000.

Even if you're travelling in Europe, your European Health Insurance Card won't fully cover you. These cards only mean you'll get reduced-cost, or sometimes free, state healthcare in the EU country you're in.



Do not always accept your current insurer's renewal and beware auto-renewals onto higher premiums. It is easy to miss reminders so keep a diary note of renewal dates and shop around a couple of weeks beforehand. Comparison websites such as, and are a good starting place.


Check existing policies to ensure you are not already covered. For example, check whether your mobile phone is covered on your contents insurance before coughing up for another policy. Also check whether your employer provides life or medical cover.


Make sure the things you would be likely to claim for are worth more than the excess. And make sure you can afford to pay the excess.


Most insurance premiums are cheaper if you pay the full amount in one go rather than paying in monthly installments.