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Protection
Many of us know someone who has died too young, or even heard of someone's battle to survive an serious illness. Anyone who's seen a family deal with these things will know that the financial implications can be devastating.
We never think it will happen to us but sometimes it does and while protection insurance can't stop the unthinkable from happening, it can make handling the consequences a little easier.
If you need medical treatment, it can pay for private healthcare, and replace some of your income if you can't work. If you die, insurance can pay a lump sum to the family you leave behind.
In this section, we explain the main things you can insure against, how it works and things to think about to help you decide whether you need insurance. Our Jargon buster will also help to make insurance clearer for you.
What is insurance ?
Insurance is a way of protecting yourself and your belongings against a particular adverse event, for example, a burglary, or losing your income because of illness. If this happens, insurance will pay out an agreed amount, or an amount to cover the damage, as appropriate. Of course, it may not happen, but you have to decide whether you're willing or able to take that risk. Some insurance, like motor insurance, is compulsory – you have to have it if you drive.
How does it work ?
The amount you pay for insurance will be based on the information you give the insurance company (the underwriter) and the type of risk you want to insure. Insurance companies use underwriting criteria, for example, where you live, if you smoke or what type of activity you would like to be covered to help them work out the price (premium) of the insurance.
You might find that some insurance companies may not be able to give you a price for the cover you need. This could be because that particular insurance company doesn't offer insurance for the type of risk you want to insure (for example things like antiques or vintage cars). If you want this type of insurance you might have to go to a company that specialises in this type of insurance cover.
The insurance company agrees to pay out if the event which you're insuring against happens. For example, your travel insurance policy may pay out for loss of luggage. It is important that you give the insurance company the correct information when buying insurance as incorrect information might affect your claim.
You pay either a sum for the whole year (or sometimes longer), called a single premium, or a regular premium, usually monthly, for the policy. You can choose which company's policy to buy yourself or you can make an enquiry through our Contacts Us Now page and let us help you choose.
Most insurance (except life cover) lasts for one year at a time and you can renew your policy when it ends, or go somewhere else for a better deal. But make sure you don't lose out by switching and always check that a new policy covers what you need it for. Always compare what's covered by a policy, not just the price. Some might be cheaper than others, but they may not offer the same level of protection.
Types of insurance
We provide a brief outline of the types of insurance here, but if you'd like more information, visit the Association of British Insurers' (ABI) Information zone website. The ABI represents the interests of the UK's insurance industry and provides information for consumers and firms.
What are pure protection and general insurance ?
Pure protection insurance includes:
term assurance (life insurance)
critical illness insurance
income protection insurance and payment protection insurance – includes elements of pure protection and general insurance.
General insurance includes:
motor insurance
household insurance
some travel insurance (see below for travel insurance we do not regulate)
health cover
pet insurance
Accident, sickness and unemployment insurance
Jargon Buster
Buildings insurance
Pays the cost of repairing or rebuilding your home if it is damaged by unforeseen events (as detailed in the insurance policy).
Contents insurance
Covers the cost of replacing possessions lost or damaged due to unforeseen events (as detailed in the insurance policy).
Cover
The protection given by insurance.
Critical illness cover
Insurance that pays a lump sum if you're diagnosed with a specified critical illness covered by your policy.
Dental insurance
A type of health cash plan that focuses specifically on dental care expenses.
Excess
The amount you agree to pay before your insurer pays the rest of the bill (for example, the first £100 of a claim).
Exclusions
Things that your insurance will not cover.
Health cash plans
Provide limited cash sums towards everyday healthcare bills.
Income protection (or permanent health insurance)
Insurance that pays you a monthly income if you're unable to work due to illness or injury, until you are able to return to work, or retirement, whichever is the sooner.
Investment-backed life insurance
Life insurance which has two roles: to protect you, and to act as an investment. These include Whole-of-Life insurance, With-profits bonds, Income and growth bonds, Endowment policies and Maximum Investment plans.
Joint life
Typically, life-cover to protect a family in the event of either or both parents dying.
Mortgage protection insurance
Accident, sickness and unemployment insurance (or payment protection insurance) used to cover your mortgage payments.
Motor insurance
Pays out if you injure someone or damage someone else's property while driving. It may also cover damage to your own car.
No claims discount
A discount if you haven't made a claim on your insurance policy within a specified period of time (for example 3 years) but it does not mean the premiums to which the discount is applied do not rise.
Payment protection insurance (or accident, sickness and unemployment cover)
Pays out a regular amount (repayments of a loan, although some cover bills as well) for a limited time – a year, say – if you can't work for health reasons or redundancy.
Policy
The details of what your insurance covers, what it doesn't, and what it costs, normally provided separately.
Premium
The amount your insurer requires you to pay for insurance.
Private medical insurance
Insurance that pays for you to receive private medical treatment.
Schedule
The specific details of what's covered, and what's excluded, by a policy.
Term insurance (or term assurance)
Life insurance giving protection for a specific amount of time (the 'term'). This policy has no surrender value.
Travel insurance
Pays out if you unexpectedly have to cancel your holiday; are taken ill while away; accidentally injure somebody or damage somebody else's possessions; lose your own possessions; and so on...
Changes in the exchange rate may increase the sterling equivalent of your debt.
For overseas mortgages we act as an introducer to other companies.
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