A national cover up
DAILY RECORD - 11TH OCTOBER 2007
Many Brits don’t have insurance and could be missing great deals.
These days it seems like everybody wants to sell us insurance.
We’re bombarded by TV adverts and junk mail flogging everything from car cover to identity theft policies. And every time we sign up for credit, there’s the offer of payment protection insurance.
There’s no doubt insurance is big business. The UK industry rakes in premiums worth over £32 billion a year – more than £530 for every man, woman and child.
But, with only about £20 billion of that paid out in claims, it’s often the provider rather than the policyholder who benefits. So it’s no wonder many people shy away from insurance altogether.
The Association of British Insurers says around a quarter of us have no protection of our home contents and half of all households have no life cover.
No one wants to pay more than is necessary for insurance, but there are some types you shouldn’t go without.
Others, meanwhile, can be a serious waste of money – the key is knowing which is which.
Get your priorities right
If you’re a motorist, you must have cover. Apart from the fact that you could end up with a bill for thousands if you’re in an accident, it’s illegal to drive without at least third-party insurance. The penalty is a fine of up to £5,000, six to eight points on your licence and possibly disqualification.
If you’re a homeowner, buildings insurance is essential too. Your mortgage lenders will insist you’re covered at least up to the level of its outstanding loan.
Even if yours is paid off, this isn’t something to economise on. Without cover, if a fire or other disaster struck, you could be left with nothing.
As anyone who suffered in this summer’s floods will tell you, it’s vital to protect your belongings too. But don’t underestimate their value to save a few pounds on your premium.
Tom Bennett, of insurance comparison site Confused.com, warns: “You might guess their value at £30,000, then there’s a flood or fire or a big burglary and half your contents are gone.
“Someone from the insurance company comes out and says we think they were worth £60,000, so you’ve lost £30,000, but we’re still only going to pay half the value of what you insured with us, which is £15,000.”
Peace of mind
If you have a mortgage or dependents, your next priority ought to be life cover. This should be enough to clear your home loan and other debts, with cash left over to help your loved ones cope without your income.
Many people think life insurance is too expensive, but it needn’t be. A 30-year-old man could get £150,000 of decreasing term cover over 25 years for under £8 a month – around 25p a day.
If you have cash left after that, instead of wasting it on payment protection insurance for your mortgage, loans or plastic, think about income protection.
That same 30-year-old man could get a £12,000 annual payout if he lost his job or become too ill to work for around £34 a month – considerably less than some people pay for their lenders’ loan or card cover.
If you’re going abroad, don’t skimp on travel insurance.
Even if you’re only going as far as mainland Europe and have a European Health Insurance Card, you’ll need cover, as several countries – and types of treatment – are excluded from this free care scheme.
Dos and don’ts
There are types of insurance you can maybe do without…
Mortgages, cards & loans
Every year, millions of people take out payment protection insurance to cover their debts if they are no longer able to work. Most simply accept their lender’s overpriced cover, spending more than £5billion annually on premiums. Yet up to 85 per cent of claims are refused, and the 15 per cent or so that succeed will have payments covered for just 12 months.
That’s why an income protection policy – which covers mortgage payments, other debts and living expenses indefinitely – is a wiser investment.
Critical illness
Financial advisers sell about six critical illness policies for every income protection policy. But consumers’ organisation Which? says most people would be better with income protection.
Only about half those off work for six months or more would receive a critical illness payout, because the main causes of the long-term absence, including stress and back pain, aren’t covered.
Identity theft
Providers use scare stories about accounts being cleaned out by crooks and credit ratings ruined to sell these policies. But provided you don’t bring it on yourself by stupidity, your financial providers should sort everything out and reimburse you for free.
Case study – a step in the right direction
Stephen Stewart from Erskine in Renfrewshire – works in security, and is aware how important it is to protect his family and possessions.
The 43-year-old father-of-four says: “I have buildings and contents cover with Legal & General. They were offering the best cover at the time, and at a reasonable price. Having children and pets, you never know what’s going to happen.
“I claimed six months ago for a camcorder after the dog knocked it out of hand. But they settled that day.”
Stephen also has life cover. So if anything happens to him, his family will be looked after. He says: “A lot of people look at insurance as money down the drain but I think it is essential.”
