Most people obtain insurance because of:
- They must (e.g., for car insurance) according to the law.
- They fear that an unfortunate event could occur and they might not be able to afford the consequences (such as contents insurance).
- They fear that their loved ones may not be able to support the cost of life insurance.
Sometimes other companies offer insurance that is useful. For example, your company might offer you health insurance. A life insurance policy is usually included in an endowment policy.
These are just a few of the aspects you can expect to face. To protect yourself from unpredicted risks, however, you will need to pay an additional fee. You can in theory guarantee yourself against any amount and any type of event. However, an insurer will assess the likelihood of you filing a claim. To determine the probability of you making a claim, insurers use actuarial tables and adjust the ‘premium’ according to their assessment.
To accurately assess your risk, insurers will often want to know a lot more about you. In order to accurately assess your risk, taking out insurance policies used to require a lot of paperwork. The process of getting insurance is now much easier. You can usually get a policy over the phone or online, though you will need to sign some paperwork.
It is possible to become a general advisor for insurance. The General Insurance Standards Council (GISC) regulates the industry. Most of them have accepted to follow it. The Financial Services Authority ensures that all insurers are trustworthy and sound. You might be eligible to receive compensation through the Financial Services Compensation System (FSCS) in the rare event that an insurance company is unable to fulfill its obligations (normally because it goes out business).
Visit an advisor or insurance broker to learn more about each type of insurance. These are some of the most common types of insurance:
Life Insurance
If you pass away, your dependents will receive a pre-agreed payment. Sometimes, the money can be earmarked for a specific purpose, such as to pay off your mortgage.
Income Protection Insurance
This insurance covers a portion of your income in the event that you are unable to work because of long-term illness or incapacity. This insurance usually takes effect only after you are out of work for a certain period. It does not typically cover all of your income.
Insurance for Accident, Sickness and Unemployment (ASU).
Although it is similar to Income Protection but only for a limited time (e.g., a year) if you aren’t working due to health reasons or redundancy, this policy usually covers you for a very short period of time.
Mortgage Payment Protection Insurance, (MPPI)
ASU covers your mortgage payments in the event you become disabled. This type of insurance typically only covers a certain period.
Private Medical Insurance
If you are able to obtain private healthcare, this policy will cover your medical expenses. It usually covers only ‘essential’ health care and does not cover elective or cosmetic treatments.
Contents Insurance
This covers the cost of replacing household goods if they are stolen or damaged. It is important to know exactly what you are covered. Contents insurance usually requires you to cover a certain amount yourself (for instance, 200 pounds).
Motor Insurance
This insurance can cover you for motor vehicle damage depending on what type. You can also get ‘3rd Party Fire and Theft’ insurance to cover any damage that you cause to another vehicle. If your vehicle is stolen or set on fire, you are covered. If liability against another party cannot be proven, or if no other party is involved (like if you hit a lamp-post), then ‘Fully Comprehensive” insurance will cover you for any damage to your car in an accident. Full Comprehensive insurance is generally more expensive because it covers more events and poses a higher risk to the insurer.
Travel Insurance
This policy covers you in the event that you need to cancel or lose your holiday unexpectedly. Most policies cover you for theft, damage, and medical expenses. It is important to check your policy carefully.