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 moneysupermarket.com, 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? Here our four insurance policies that may not be essential, but would be worth having.
The usefulness of this insurance, for theft or accidental damage in or outside the home, depends on the value of your personal items.
If they are worth a lot, in the case of heirlooms and antiques, they are worth insuring. But not all policies will cover high-value items, so these may need to be insured separately anyway.
If you can easily afford to replace items such as TVs, laptops or designer handbags by dipping into savings, then contents cover may be less valuable to you.
This isn't as important as life insurance or income protection, according to Morris, but a useful add-on if you can afford it. The policy will pay a tax-free lump sum if you become seriously ill or disabled before retirement age. You might not think that's likely but in fact it happens to one in four women and one in five men, according to insurer Bright Grey.
PRIVATE MEDICAL INSURANCE
This will pay for necessary treatment following GP referral for illness or injury that is not related to a preexisting condition. Many big employers offer it as a benefit to staff. But many people do not know they are already covered, so it is worth double-checking.
Vet bills can total thousands of pounds. Uninsured animals may have to be put down if owners cannot afford the treatment, so these policies, which cost around £15 a month for a young dog, can pay off.
It is wise to take out whole-life cover with one provider as this will continue to pay out for the same condition if it recurs throughout the pet's life.
Switching to a new policy with a new insurer after a pet has suffered a condition will invalidate any claims for that illness in future – this is one case where you shouldn't shop around for a better deal each year.
HOW TO BUY INSURANCE
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 oof weeks beforehand. Comparison websites such as moneysupermarket.com, confused.com and comparethemarket.com are a good starting place.
DON'T DOUBLE UP
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.
CHECK YOUR EXCESS
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.