It’s unlikely that you’ll need every insurance product on the market, even if you could afford them all. But how do you know whether your hard-earned cash is going on the policies you need the most? The table below is designed to help you make the right decisions for you and your household budget. Home insurance Car insurance Travel insurance Life insurance, critical illness, income protection and payment protection Private medical and dental insurance Pet insurance Home Insurance What does home insurance cover? Do you need it? Buildings insurance Covers the cost of repairing or rebuilding your home if it’s damaged by storm, floods, fire, lightning, subsidence, etc You won’t be covered for general wear and tear You’re unlikely to be covered for properties left unoccupied for more than 60 continuous days Yes, it is a legal requirement if you own your home, plus mortgage lenders normally insist on you having buildings cover. Repairing your home can be very expensive so buildings insurance could save you a fortune in the long run You’ll need to read your policy document carefully to check what is and isn’t covered Buildings insurance – Do you need it? Contents insurance Covers your possessions for loss or damage You won’t be covered for general wear and tear It usually doesn’t cover properties left unoccupied for more than 60 continuous days Yes, for most people it’s vital in case your home is burgled or there’s a fire or flood. You can usually get a new item to replace your damaged or lost one You can choose to get cover in case you lose items outside your home You’ll probably need to pay an excess on every claim and your premium will probably rise the following year Some items are only insured up to a certain limit, so you might need to pay for extra cover for these Find out more – Do you need contents insurance? Car insurance What does car insurance cover? Do you need it? Car insurance There are – three types of cover: Third party – this covers other people (such as your passengers) involved in an accident, or damage to other people’s property, but if your car is damaged or stolen you have to pay for it yourself Third party, fire and theft – like third party but covers repairs or replacement if your car is stolen or set on fire Comprehensive – covers everything above and also covers damage to your own car Yes, you are legally obliged to have at least third party cover. It protects you against personal injury claims which can run into millions of pounds Driving without insurance will lead to disqualification from driving and possibly prison Insurance for young, newly qualified drivers is very expensive If you need to claim there is often a gap between what the insurer pays out and the cost of replacing your car Find out more – Car insurance – choose the right level of cover GAP (Guaranteed Asset Protection) insurance Covers you if you write off your car – it pays the difference between what your motor insurance policy pays out and either: What you paid for the car What you still owe on the car, or What it would cost to buy the same car new It only covers you if your car has been labelled a total write-off or unrecoverable You should only consider it if you owe your car dealership more than your car is now worth. You don’t need it if: You consider the cover from your motor insurance policy is sufficient You’ve an ‘agreed value’ car insurance policy You’re using a finance agreement that already covers you for the difference between the book price and how much you paid You got a big enough discount on your car to cover any depreciation GAP insurance enables you to get a replacement car equal to the one you had You might not be covered for as much as you’re expecting – for example non-standard extras on your car, or a high excess Travel insurance What does travel insurance cover? Do you need it? Travel insurance Most cover: Emergency medical expenses Personal liability, if you’re sued for damaging property or causing injury Lost or stolen bags The costs of cancelling, delaying or cutting short your trip You won’t normally be covered for a pre-existing medical condition Yes, it’s a must if you want to be able to afford medical care when you’re abroad. Most policies provide up to £1 million of medical cover and will fly you home for treatment Adventure sports, winter sports and any ‘dangerous activities’ will need extra cover Cover for possessions is often poor value for money Find out more – Do you need travel insurance? ife insurance, critical illness, income protection and payment protection What does life insurance, critical illness, income protection and payment protection cover? Do you need it? Life insurance It pays your dependants a lump sum or regular payments if you die Yes, if your children or partner depend on your income to cover the mortgage or other living expenses. Check whether you have an employee package that includes ‘death in service’ benefits, if so, you might not need more life insurance or maybe just a top-up If you’re young and healthy, life insurance is very good value for money – providing high cover at a relatively low cost It only covers death – it won’t cover you if you can’t work due to illness or disability Existing medical conditions might not be covered and – if you have a serious health problem – you might not be able to get cover or only at a high cost Find out more – Do you need life insurance? Critical illness insurance It pays a ‘lump sum’ (or some policies will pay an income) if you’re diagnosed with a specific serious illness, for example: Heart attack Stroke Certain types and stages of cancer Conditions such as multiple sclerosis Most policies will also pay out if you’re permanently and totally disabled after an injury or illness It’s not as important as life insurance but you might need it if you and your family depend on your income to cover the mortgage or other living expenses. Check whether you have an employee package that provides an income if you can’t work for a long period – you might not need critical illness cover If you couldn’t support yourself and your dependants if you were too ill to work, then you should consider critical illness or income protection cover If you can afford it – you can buy a combined life and critical illness policy A payout can make a big difference when you need it most, for example you could use it to pay off your mortgage Some cancers and ‘chronic’ conditions might not be covered, even if they mean you can’t work Health problems you had before you took out the insurance are very unlikely to be covered Find out more – Do you need critical illness insurance? Income protection insurance Pays a percentage of your take-home pay if you can’t work for a while because you’re ill or disabled It covers most illnesses that leave you unable to work It doesn’t cover you for unemployment You should consider it if you can’t rely on savings or employee benefits to see you through an illness. You’re most likely to need it if you’re self-employed, or you don’t have occupational sick pay or savings to fall back on Your living expenses and bills should be covered until you can start working again or retire – depending on the term of the policy You can claim as many times as you need to while the policy lasts Beware different definitions of ‘unable to work’ this will mean different things in different policies – get advice before buying You might not get cover if you have existing health problems or a dangerous job Find out more – Do you need income protection insurance? Payment protection insurance (PPI), and mortgage protection insurance (MPPI) Covers your monthly mortgage, loan, and credit card repayments in case you: Have an accident Become ill and can’t work, or Become unemployed Usually, it won’t cover you: For pre-existing conditions If you’re self-employed, a temp or contractor If you’re retired or unemployed If you lose your job within 3–6 months of taking out the policy You probably don’t need it if: You could get by on your sick pay or redundancy pay You have enough savings to cover your repayments Your partner could cover the mortgage and other loan repayments You’re young, single, in good health, and only have spare cash for basic insurance It can ease your money problems if: You’re made redundant and are likely to be out of work for a long time If you’ve little or no savings and quite a lot of debt Other factors: You might have to wait up to 90 days before you can claim It will only pay out for a limited time (say 12 months) even if your illness or period of unemployment lasts longer Find out more – Do you need payment protection insurance (PPI)? Private medical and dental insurance What does private medical and dental insurance cover? Do you need it? Private medical insurance Health insurance reimburses the cost of all or some of your medical bills if you pay for your own healthcare Basic private medical insurance covers most in-patient treatments (tests and surgery) and day-care surgery. Some policies also cover out-patient treatments (such as specialists and consultants) It doesn’t usually cover treatment for: Pre-existing medical conditions Chronic illnesses such as diabetes, mental health issues and depression Cosmetic surgery Routine check-ups Pregnancy You get free treatment on the NHS, so you only need private medical insurance if: You think you might need treatment you can’t get on the NHS, like specialist surgery for sports-related injuries, or certain cancer drugs or treatment You just don’t want to use the NHS and would prefer to stick to private hospitals and clinics where possible Other factors You can ask your GP to refer you to a private expert or specialist If the NHS won’t let you have a scan or makes you wait, you can use your cover to pay for it You can use your insurance to reduce the time you spend waiting for NHS treatment It can be expensive, depending on what types of treatment you want to be covered for Premiums rise every year, and with age, so by the time you’re older and more likely to need hospital treatment, you might not be able to afford the premiums Find out more – Do you need private medical insurance? Dental insurance Covers routine check-ups, as well as the costs of all dental work, including dental accidents and emergencies It doesn’t cover cosmetic work If you can’t go to an NHS dentist, or you need to have a great deal of work done on your teeth, dental insurance might be a good idea. If you need a lot of treatment, dental insurance can provide good value for money You can normally only start to claim between one and three months after you buy the insurance Premiums might increase if you make a claim for anything other than a standard check-up Find out more – Do you need dental insurance? Pet insurance What does pet insurance cover? Do you need it? Pet insurance Covers the cost of veterinary treatment for your pet Annual jabs, spaying and neutering are not covered Optional – if you can’t afford the cost of treatment out of your spare income, you should consider getting insurance. Most needed if you have a breed of dog or cat that’s likely to cost you a lot in medical care Veterinary bills are costly and rising all the time – if your pet gets a very serious injury or a chronic illness, pet insurance can be good value for money Keep up with regular vaccinations or your pet insurance won’t pay out if you need to claim It’s difficult to get cover for a pet that is old or already has a medical condition Find out more – Do you need pet insurance?