Protecting your home.
Although you have no legal obligation to insure your home, your
mortgage company will want to protect their investment with buildings
insurance. However, it is also worth protecting your own investments,
so even after you’ve paid off your mortgage, you should ensure you’re
financially covered.
Home contents insurance and personal possessions insurance
According to Money Observer, the average home has £44,000 of contents
and replacing this without insurance would be almost impossible for
most people. An average premium is about £150 a year and will provide
cover up to £50,000. The majority of contents insurance policies
additionally provide public liability and personal legal expenses and
although most people don’t claim on these, they could be very useful if
needed.
Personal possessions insurance is worth taking out because often it
covers your belongings outside the home, as well as inside the home,
and is often incorporated into your contents insurance. Personal
possessions insurance is also frequently referred to as all risks
insurance and offers cover on possessions that are lost or stolen
outside of the home.
Income protection
Income payment protection insurance is recommended by most insurers as
the most appropriate way to safeguard your mortgage repayments and any
other monthly bills. Kevin Carr, a senior technical advisor at
LifeSearch believes that this is a better option than payment
protection alone, including accident sickness unemployment (ASU) and
mortgage payment protection insurance (MPPI). In a recent statement,
Carr revealed that “the banks and mortgage lenders make huge profits
from sales of payment protection. For instance, 17% of Lloyds TSB’s
profits come from this.”
Debts – you don’t want them to haunt you
In addition to safeguarding your income to assist with loan repayments,
you may also wish to consider personal finance products such as life
assurance and critical illness insurance, which, under certain
conditions provide a lump-sum that can be used to pay off the mortgage
in difficult circumstances. The choice of life assurance or critical
illness cover will depend on personal variables. For example, if you
are single and have no dependents, then nobody would benefit from your
life being heavily insured. However, should you be diagnosed with a
serious illness, a lump sum might be helpful to ensure you maintain a
reasonable quality of life. Personal accident plans can be helpful if
you believe the specific conditions of the policy would be relevant to
you. Examples include insurance providers such as Nationwide who will
provide cover of around £50,000 for the loss a limb, £10,000 for a hip
and £2,500 for a toe, in relation to a premium of £4.95 month.
Health insurance / private medical insurance
There are many difference financial products available for insuring
your health and they vary in accordance with your stage as life.
Examples include critical illness insurance, as discussed above, as
well as long-term care insurance and medical insurance, which may also
be referred to as private medical insurance or simply health insurance.
Wikipedia argues that health insurance is one of the more controversial
forms of insurance due to the tumultuous debate of insurance companies
remaining solvent, against the needs of its customers to actively
protect their health.
One of the main problems insurance companies face is the issue of
“adverse selection”, a term used to describe the increased likelihood
of sick people signing up for health insurance. Health insurance
companies argue that those people seeking health insurance are often
those with existing medical problems, those who are much more likely to
have medical health insurance problems in the future and those who may
engage in “risky behaviour” such as excessive alcohol consumption and
smoking. Products such as health insurance tend to fuel fiery debates
of the moral argument of health insurance costs and the question that
if people pay for health insurance, are they more likely to lead a
“risky” lifestyle in the knowledge that they are covered.
Travel insurance
Travel insurance isn’t complicated, but there are a few considerations
you should bear in mind. Travel insurance typically covers issues such
as cancellation, loss of baggage and medical expenses. However, Money
Observer ( http://www.moneyobserver.com/ ) recommend better value by
including baggage cover in your personal possessions insurance and not
as part of your travel insurance policy. The consumer financial
magazine also recommends extending your motor insurance – to ensure
your car is covered when driving abroad.
Moneynet ( http://www.moneynet.co.uk/ ), a personal finance consumer
information site, makes the point of shopping around for your travel
insurance and avoiding the high street travel agents. According to
their insurance guide:
“Since January 2005, it is especially important to avoid the travel
agents when buying travel cover; from that date, the insurance industry
falls under the regulation of the Financial Services Authority, giving
that body the ability to investigate and take action on behalf of
consumers. Tour operators and travel agents, however, are not subject
to this regulation, so if you have a complaint about travel insurance
purchased from a travel agent, the FSA and the Financial Ombudsman
Service will not be able to intervene on your behalf.”
In a recent press release, moneynet also blasted high street travel
agents for exorbitant insurance, stating that, “major high street
players like Thomas Cook, Thomson and Travelcare, which between them
account for around 70 % of the travel insurance market, levy premiums
that are typically twice as expensive as buying cover online.”
Weddings – insure your finances for better and for worse
Insurance may not be romantic, but it’s important and if your wedding
doesn’t go according to plan, it can be very expensive. Wedding
insurance will typically cover dress damage, loss of rings and retaking
the photographs if anything goes wrong with the photographer or prints.
Insurance doesn’t always come with guarantees, but shopping around to
make sure you have the most appropriate protection for yourself, your
partner and your family will give you a certain amount of peace of mind.
Disclaimer:
We only show you the way – it is up to you to follow the path of
enlightenment. All information, is intended for general information
only and should not be construed as advice under the Financial Services
Act 1986. You are strongly advised to take appropriate professional and
legal advice before entering into any binding contracts.
