Protecting yourself and your family is one of the most important things in life. Insurance gives you peace of mind and can also cover holidays, loan repayments and key possessions.
VALUE YOUR LIFE
Life insurance pays out a pre-determined lump sum in the event of the policyholder’s death. It is often taken out against a large financial liability, such as a mortgage. Some policies pay out a set sum throughout their term, some pay a decreasing amount over the term and some pay out an increased amount over time.
Premiums vary depending on the type of policy and the person applying. Policies may be taken out individually or jointly.
Private medical insurance is designed to cover the costs of private medical treatment for acute conditions. An acute condition is usually a disease, illness or injury that is likely to respond quickly to treatment and return you to health. Children, as well as parents, can be insured on the same policy.
Critical illness (CI) insurance pays a lump sum at diagnosis of certain illnesses defined in the policy terms and conditions. ABI guidance ensures that the nature of the product, and the definitions of illnesses covered, are easy for consumers to understand. Many people buy a combination of CI and life insurance, and again, children can be insured on the same policy.
Income protection insurance pays out a regular amount if the policyholder becomes too ill to work and loses their source of income. Payment may continue up to retirement if the illness turns out to be permanent.
Customers must give accurate and full information about pre-existing medical conditions. Companies need this information to work out the premiums payable and any exclusions. Failure to do so may render a policy invalid at the point at which a claim is made.
You build up a pension throughout your working life which, when you retire, is converted into a regular income for the rest of your life. Retirement may seem like a long time away, particularly for new parents, but making adequate provision for it is hugely important and can prevent poverty in old age.
Pension freedom rules, introduced in April 2015, mean that you now have more choice and flexibility over how and when you can take money from your pension pot if you’re aged 55 and over. For more information, visit the Pension Advisory Service at https://www.pensionsadvisoryservice.org.uk/about-pensions/pension-reform/freedom-and-choice and the Government advice service, Pensionwise, at https://www.pensionwise.gov.uk/en.
HOME SWEET HOME
Buildings insurance will cover damage to the bricks and mortar of your home caused by storm, flood, fire, malicious damage and subsidence. Contents insurance will cover all your possessions from these risks, as well as burglary. Policies will usually include the cost of alternative accommodation, up to a set limit, should you need to move out of your home while it is being repaired. Don’t think the worst could not happen to you. In 2016 home insurers paid £299 million in burglary claims, £371 million following damage caused by bad weather, and £100 million to repair homes damaged by subsidence.
Your property should be insured for its full rebuilding cost and contents. Check policy limits so that you are aware of anything that is above this limit and may have to be insured separately.
ON THE MOVE
By law, you must insure your car and the minimum legal requirement is third-party liability. This alone does not cover your own car if stolen or damaged so, for most people, third-party, fire and theft insurance or comprehensive insurance is the better option.
Travel insurance can ensure your holiday does not turn into a nightmare. Policies cover you for emergency medical treatment should you fall ill, lost possessions or if you need to cancel your trip.
If you have loan repayments you might consider payment protection insurance, which helps meet repayments should you fall ill or are made redundant.
There’s a range of commercial insurance products available if you run your own business or are self-employed. These can cover everything from your premises, stock, employee wages, and, in certain circumstances, lost trade. If you work from home, check if your existing home insurer is able to cover your business activities.
THE RIGHT ADVICE
With so many policies available, how do you decide which are best for you? Talk to a local insurance broker to assess your insurance needs or check the internet for the best deals. But a word of warning: Don’t just buy on price – make sure you have the right level of cover to meet your needs. That way, should the worst happen, you can rely on the policy to ease your financial burden.
The ABI website (www.abi.org.uk) has a cost calculator, which is useful if you’re buying home insurance, and a handy consumer guide to protection insurance products.
• For more detailed guidance on calculating your home buildings sum insured, visit the Building Cost Information Service at the Royal Chartered Institute of Surveyors at https://calculator.bcis.co.uk/home.aspx
• Independent financial advisers give detailed advice on life and protection products; to find one in your area visit www.unbiased.co.uk.
• The British Insurance Brokers’ Association can direct you to an insurance broker in your area. Visit www.biba.org.uk.