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Eastbourne Citizens Advice BureauFinancial Literacy

INSURANCE

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If you lost something or it was stolen could you afford to replace it?

If your flat caught fire and everything was destroyed could you afford to start again?

If you crashed your car into someone else’s how would you pay for the damage?

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Insurance is a way to protect things against damage or loss. You pay an amount which gives you an amount of protection in return according to your policy.

If the worse should happen and something is damaged you make a claim to the insurance company who will pay you.

You can insure many things for varying circumstances.

This unit covers the main uses of insurance.

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Home Contents

You can insure the contents of your home against fire, theft or accidental damage. Most policies give you cover up to a maximum amount such as £30,000.

You may insure specific items which are worth more.

Some policies give you cover for your possessions when you take them out of your home. This is useful for items like mobile phones, cameras, laptop computers etc in case they are lost, stolen or damaged.

You can also get cover for damage caused by accidents.

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Buildings Insurance

For most of us a home is the most expensive thing we will ever buy. How would you replace or repair a house if it were damaged by serious accident, like flooding, car crash or lightning strike?

Buildings Insurance covers you against these types of hazard.

Most mortgage lenders will expect you to take out some kind of buildings insurance to pay for major repairs.

Buildings insurance does not cover your personal possessions – that’s covered by Home contents insurance.

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Vehicle Insurance

Cars, vans and motorcycles are all expensive items and as well as being costly, accidents can cause serious injury.

The law requires that any vehicle owner has insurance to cover against accident damage to other people, known as “Third party”.

That means that if you hit someone else’s vehicle your insurance company pay for their repairs. The insurance company can also pay out compensation for injury.

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“Third party, fire and theft” gives insurance cover against accidents and injury to other people and also pays out in the event that your vehicle is stolen or damaged by fire.

Fully Comprehensive insurance gives cover to third parties and also damage to your vehicle by whatever cause.

Insurance policies vary so always check the details of your policy.

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Excess

Many insurance policies require that when you make a claim you must pay an amount e.g. £50. This amount is known as the excess.

Check your policy for details of any excess.

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No Claims Bonus

Many insurance offer you a discount if you do not make a claim. This means that if you do not make a claim on your insurance during the past year, the amount you pay for insurance cover (known as the premium) for the next year is reduced.

Some insurance policies allow you to make a claim without losing your no claims bonus. This is called a protected no claims bonus. You will usually have to pay a higher premium for this.

If you decide to change your insurance to another company you can usually take the no claims bonus with you.

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Policy

Your insurance policy is a contract which sets out the details of the cover you are paying for. It should explain in detail what is covered and what is not covered as well as how to make a claim.

You will usually be sent a printed copy of your insurance policy through the post but now that many insurance companies operate through websites you can also read the policy online.

It is worth having a look at the policy before you accept it, so that you fully understand the conditions.

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Life Insurance

Who would provide for your family in the event of your death?

This may seem like a morbid question but if you are a financial provider for your partner and children, you may be concerned about their welfare if you were to die suddenly.

Life Insurance (sometimes called Life Assurance) pays out in the event of your death. Some policies pay out an amount on a set date which is known as the when the policy “matures”.

There are a large variety of policies available each with different conditions.

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Holiday Travel Insurance

You can take out insurance to cover possible difficulties while travelling or on holiday. You can book this when you arrange a holiday or separately. You could also have annual policy which covers any travel.

Travel Insurance covers things like:

• Medical expenses

• Injury or death

• Lost, Stolen or Damaged Property

• Delays, cancellation and missed travel arrangements.

Some policies will not cover certain things like dangerous activities so it is worth checking when you buy travel insurance.

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Health Insurance

In the UK we do not have to pay for medical treatment provided by the National Health Service. This is because the NHS is paid for by our National Insurance contributions, deducted from our wages. This means we do not have to worry about the cost of the treatment which in reality can add up to thousands of pounds.

You can also take out additional private Health Insurance which gives you access to treatment by private doctors or dentists. These can sometimes give you access to treatment sooner than the NHS.

There are several companies who offer private health insurance in the UK and some have their own private hospitals or treatment centres.

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Critical Illness Insurance

Critical illness insurance provides you with a lump sum of money if you are diagnosed with certain illnesses or disabilities such as a heart attack, stroke, loss of arms or legs, or diseases like cancer, multiple sclerosis or Parkinson’s disease.

If being ill has left you out of pocket, it can be really handy to have a large sum of money to spend on things like everyday expenses, paying off your mortgage or your medical expenses. You can use the money in any way you like, you don’t have to spend it on anything in particular.

The costs of critical Illness insurance can be quite high and you may never need to use it. You won’t get any money back if you never make a claim. So before you think about taking out critical illness insurance, consider :-

• whether you already have some illness insurance combined with another insurance policy like a life insurance policy.

• what benefits your employer pays out if you can’t work because of ill-health or disability

• whether you have savings you can use instead of insurance.

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Payment Protection Insurance

When you borrow money you can take out optional insurance in case you become unable to make the agreed repayments. This could be for reasons like redundancy, loss of work, illness or accident.

If you have to make a claim the insurance will pay a minimal amount towards the cost of your repayments.

Check the details of the policy to find out when it will pay out.

PPI can be very expensive and it may not be suitable for you or you may have other ways to cover the repayments if you need to, so stop and think about whether you really need it before you agree to take it out.

Always check the terms and conditions of the policy very carefully. There will often be lots of exclusions, which means there may be lots of circumstances where you won't be covered if you want to make a claim

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Pets Insurance

If your pet becomes ill, veterinary treatment can be expensive.

You can take out a pet insurance policy to cover the costs of vets bills.

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Complaints

If for any reason you are dissatisfied with the service you receive from an insurer you should complain to them directly. Your policy may have details of a complaints procedure.

If you want to take the complaint further you can contact the Financial Services Authority at http://www.fsa.gov.uk/

Or contact the Financial Ombudsman Service atwww.financial-ombudsman.org.uk

Or visit your local Citizens Advice Bureau