Inside Insurance – Protection Priorities By: Rachel Lane 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. About the Author: Rachel lives in Edinburgh with the teenage mutant ninja turtles. She also writes for the personal finance blog Cashzilla ( www.cashzilla.co.uk ) – locally known as Scotland’s favourite personalfinanosaurus.

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