Five insurance must-haves
1: Travel insurance
This is as important as packing your suitcase, according to Graeme Trudgill at the British Insurance Brokers Association. But shop around and check the small print to make sure you have the right amount of medical cover.
2: Home and contents insurance
Contents cover is not mandatory, but it's important as it covers all your worldly possessions; and you can't get a mortgage without buildings cover.
Make sure you have enough cover. Hiscox revealed recently that 60% of high-net-worth homeowners underestimate the true value of their possessions, leaving them underinsured. Don't do the same: add up the value of everything, including clothes.
3: Income protection insurance
Income protection is worthwhile - especially if you're self-employed or work for a small firm - as it will pay out a regular monthly sum if you fall ill and can't work.
4: Life insurance
Life insurance will pay out a lump sum if you die - this is crucial for people with dependants.
5: Car insurance
By law you must have car insurance if you drive. Policy premiums vary greatly, depending on the type of car you have, your driving record and your age, as well as your gender.
Make sure you review your policy on a regular basis.
Generally thought of as being interchangeable with life assurance, but isn’t. Life insurance insures you for a specific period of time, at a premium fixed by your age, health and the amount the life is insured for. If you die while the policy is in force, the insurance company pays the claim. However, if you survive to the end of the term or cease paying the premiums, the policy is finished and has no remaining value whatsoever as it only has any value if you have a claim. For this reason, life insurance is much cheaper than life assurance (also called whole of life).
Income protection insurance
If you can’t work in the event of sickness or illness, income protection insurance aims to give you an income, with the amount of income set by you up to 75% of your gross (before tax) income with the premiums varying by how much of your salary you want to cover, as well as your age and health and when you want to start receive any payouts. Any payouts from income protection insurance are tax-free and usually continue until you recover, reach your selected pension age or the period of cover specified in the policy comes to an end. Income protection insurance does not cover redundancy but you can buy it as a bolt-on.
Does exactly what it says on the tin: covers the contents of your home for theft and damage and also may insure certain possessions (jewellery, cycles) outside of the home. Things to watch for include the excess and also the maximum payout on individual items. Another grey area is kitchen fittings, as some contents policies say these are not contents but part of the fabric of the property and covered by buildings insurance and some buildings policies don’t cover them because they regard them as contents.