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                                                                            About this guide
The Money Advice Service is here to                                         This guide is for you if you want to protect
help you manage your money better.                                          your family, health, income or possessions.
We provide clear, unbiased advice to                                        When you read it you will know:
help you make informed choices.                                             ■ how insurance works and when you might need it

                                                                            ■   some of the different types available, and
                                                                            ■   what you need to think about when buying it.

                                                                                                                      What is insurance?                  2
                                                                                                                      Types of insurance                 6
                                                                                                                      Key things to
                                                                                                                      think about                        22
                                                                                                                      Your questions
                                                                                                                      answered                           25
                                                                                                                      Next steps                         26
                                                                                                                      If things go wrong                 27
                                                                                                                      Jargon buster                      28
                                                                                                                      Useful contacts                    31

We try to ensure that the information and advice in this guide is correct
at time of print. For up-to-date information and money advice please
visit our website – moneyadviceservice.org.uk.
                                                                                                                             moneyadviceservice.org.uk        1
    What is insurance?

    Insurance protects you against              You may consider different types of         Insurance checklist
    the unexpected. Everyday life can           insurance at various stages in your life.
    have its problems. Think about              For example, if you’re buying or own a       Do you need         Use our online budget planner to help you see how much
                                                                                             insurance?          money you’ve got coming in against all your outgoings – see
    how you would cope financially              home, or starting a family, you may
                                                                                                                 moneyadviceservice.org.uk/budget. This will help you work out how
    if you or your partner became ill           want to protect your income,                                     you would cope if something unexpected happens. Think about
    and couldn’t work, or if fire               borrowing, health or possessions. But                            whether you need insurance when your circumstances change, for
    seriously damaged your home?                if you’re single, have no dependants                             example if you buy a home or start a family.
    Although we always hope nothing             and are renting or living at home, you       What if your        Certain insurance, sometimes known as protection insurance,
    bad will happen, only you can decide        may not need all of these.                   household income    can pay out in these instances, but they usually only pay out for a
    whether you’re willing or able to take                                                   decreased,          limited time and don’t cover all circumstances – see pages 6-8.
                                                Use the following checklist to see what
                                                                                             through illness,    State benefits may help, but most don’t start immediately and
    the risk. If something does happen,         insurance you might need. For more           disability or       usually only last for a fixed period.
    you may have enough savings to be           information about the different types of     unemployment?
    able to manage, but in case you don’t,      insurance available, what they cover,
    insurance may help.                                                                      What would          Life insurance provides some financial security for people who
                                                and what to look out for, see Types of       happen if you or    depend on you, in case you die unexpectedly – see page 9. It’s
    See the Jargon buster on page 28 for        insurance on page 6.                         your partner died   also a good idea to check what your pension plans will pay out
    an explanation of some of the words                                                      suddenly?           when you die.
                                                There is also more information on all
    you may come across.                        these types of insurance on the Your         Are you a home      Most mortgage providers insist that you take out buildings
                                                money section or our website – see           owner?              insurance, but it’s worth checking that the amount covered is enough
    Do you need insurance?                      moneyadviceservice.org.uk.                                       to rebuild your house – see page 10. There are also mortgage
                                                                                                                 protection policies to cover your mortgage repayments if your
    There are lots of different types of                                                                         income stops due to accident, sickness or redundancy – see page 7.
    insurance available and it can be
                                                                                             What about your     Whether you own your home or are renting, it’s your responsibility to
                                                                                             belongings?         insure your belongings. Contents insurance covers the loss of, or
    Motor insurance is compulsory if you                                                                         damage to, the contents of your home and other items you take
                                                                                                                 outside your home – see page 11.
    own a vehicle, whether you drive it or
    not, unless you have a statutory                                                         Do you drive?       The law requires that you have basic motor insurance if you own
    off-road notification (SORN) for it.                                                                         a vehicle – see page 12.

    And liability insurance is compulsory if                                                 What about          Pet insurance can pay towards vets’ bills, and some schemes will
    you run certain types of business. All                                                   your pets?          pay for you to advertise if your pet has been lost, or for kennel/
    other insurance is optional. Buildings                                                                       cattery fees if you suddenly have to go into hospital – see page 13.
    insurance is not compulsory but most                                                     And don’t forget    Travel insurance can cover you against mishaps while you’re
    mortgage lenders will insist you have it.                                                the holiday         abroad, from lost luggage and theft to flight delays and medical bills
                                                                                                                 – see page 17.

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    How insurance works                        Insurance regulation                        Got a question about
    The amount you pay for insurance will      The Financial Services Authority (FSA),     money?                                      Key points
    be based on the information you give       the UK’s financial services regulator,      From budgeting to borrowing, from           ■   Check whether you need the
    the insurance company and the type         regulates sales of most insurance           insurance or savings to pensions, our           insurance – most insurance is
    of risk you want to insure. Insurance      products. However, its selling rules        trained advisers can help you with your         optional.
    companies use certain criteria (such as    don’t currently cover the sale of           questions. We offer free, unbiased
    where you live, if you smoke, and what     extended warranties on non-motor
                                                                                                                                       ■   Find out whether you’re already
                                                                                           information and advice which means
    you would like to be covered) to help      goods (such as on electrical goods)                                                         covered by an existing policy.
                                                                                           we won’t sell you anything. You can get
    them work out the price (premium) of       where the person selling the insurance      this in print, online, over the phone and   ■   Always give the full facts, so that
    the insurance.                             is also providing the goods.                face to face.                                   the company can work out the
    The insurance company agrees to pay        Even if its rules don’t cover the sale of                                                   correct premium for you.
                                                                                           We also provide tailored advice to
    out if the event you’re insuring against   a policy, they do cover the insurance       help you make choices at key points
    happens. It is important that you give     company providing the policy, as long       throughout your life, whatever your
    the insurance company the full facts       as they are based in the UK and are         circumstances. Take our online health
    when buying insurance, as incorrect        regulated by the FSA.                       check. Answer some straightforward
    information could invalidate your policy                                               questions and get your personal action
                                               Regulated firms and their agents are
    and mean the insurance company                                                         plan to help you with your money
                                               listed on the FSA Register and have
    won’t pay out.                                                                         must-do’s and longer-term goals.
                                               to meet certain standards. Always
    You can choose for yourself which          check that the firm you’re dealing          Call us on 0300 500 5000 or go online
    company’s policy to buy, or you can        with is on the FSA Register by calling      at moneyadviceservice.org.uk/
    go to an insurance broker who’ll help      0845 606 1234 or going online at            healthcheck.
    you choose – see Useful contacts on        www.fsa.gov.uk/fsaregister. If it’s
    page 31. An insurance broker is a          not regulated by the FSA, you won’t
    professional who helps people find         have access to complaints and
    suitable cost-effective insurance          compensation procedures if things
    protection. Brokers can give advice        go wrong – see page 26.
    on many issues as well as support in
    making claims.
    When buying insurance, always
    compare what a policy covers, not just
    the price. Some might be cheaper than
    others, but they may not offer the same
    level of protection.

4                                                                                                                                              moneyadviceservice.org.uk         5
    Types of insurance

    Protecting your income                        Some employers arrange group               Critical illness insurance                    Payment protection insurance
    or borrowing                                  income protection insurance for their      This pays out a lump sum if you’re            (PPI)
                                                  employees as a benefit of their job, and   diagnosed with a specific critical illness.   This insurance aims to help you keep
    Once you take out any kind of loan, it’s      this can pay out an income after the
    very important that you make all the                                                     Most policies cover you if you develop        up your loan repayments if you can’t
                                                  statutory sick period. So make sure you    certain types of cancer or have a stroke      work because of redundancy, accident
    repayments in full and on time. If your       check what your employer offers.
    loan is a mortgage or other loan                                                         or heart attack beyond a certain level of     or illness. You can take out a PPI policy
    secured on your home, you could risk          After 28 weeks or if you’re not working,   severity. You may also be covered if you      specifically to cover your mortgage
    losing your home if you don’t keep up         state benefits may help. But most don’t    develop MS or kidney failure, or need a       repayments, which is called mortgage
    the repayments. It could also affect          start immediately and they usually         major organ transplant or a coronary          payment protection insurance (MPPI).
    your credit rating.                           only last for a fixed time. You may have   artery bypass. Many policies cover
                                                                                                                                           A typical policy will start to pay an
                                                  enough savings to cover you but, if not,   other conditions as well. But check the
    Products designed to protect your                                                                                                      agreed amount one month after your
                                                  insurance may help.                        policy conditions carefully because
    income or borrowing include:                                                                                                           income stops due to redundancy,
                                                                                             some policies may only cover one or
                                                                                                                                           accident or illness. It will pay out for a
        critical illness insurance                                                           two of these illnesses. You must
    ■                                                                                                                                      set time only – usually 12 or 24 months.
                                                                                             disclose any pre-existing medical
    ■   payment protection insurance                                                         conditions or your policy may be invalid.     Most lenders aren’t allowed to sell you
        mortgage payment protection                                                                                                        PPI when you take out a loan (the only
                                                                                             You can use the payout for medical
        insurance                                                                                                                          exception to this is if you take out PPI
                                                                                             treatment, to pay off your mortgage or
                                                                                                                                           with retail credit, such as a credit
        income protection insurance, and                                                     for anything else.
                                                                                                                                           account with a catalogue company),
    ■   life insurance.                                                                      Check – read your insurer’s terms             but they may provide you with a quote.
                                                                                             carefully, not just for the range of          If you want to take out a PPI policy, you
    If you are an employee and you fall ill, in                                              illnesses they cover but also how these       can use this quote to search the market
    most cases your employer must pay                                                        are defined and the level of severity         and get the best deal.
    Statutory Sick Pay for up to 28 weeks,                                                   needed to meet the definition.
    though this will probably be a lot less                                                                                                Make sure you shop around, and use
    than your full earnings.                                                                                                               our online comparison tables to
                                                                                                                                           compare the features and costs of PPI
                                                                                                                                           and MPPI products – see

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    There is a variation on this called         Income protection insurance                 Life insurance                            Decreasing term insurance is often
    short-term income protection                It replaces part of your income if you      If someone depends on you financially,    linked to a repayment mortgage. It
    insurance. This is similar except it pays   are unable to work for a long time          how would they cope financially if        may then be called mortgage term
    out a sum linked to your income or          because of illness or disability. It        you died?                                 insurance or mortgage protection
    another pre-set amount rather than a        continues to pay out until you return to                                              life insurance.
    sum linked to a loan repayment.                                                         There are two main types of life
                                                work, die, or the policy term expires,                                                Whole-of-life insurance pays out an
                                                                                            insurance: whole-of-life insurance and
    Also known as accident, sickness            whichever is soonest.                                                                 agreed sum when you die, whenever
                                                                                            term insurance.
    and unemployment (ASU) insurance.           These products usually offer a choice                                                 that is.
                                                                                            Term insurance pays out only if you
    Check – if you decide you do want it,       of waiting periods before they will start                                             Check – if you don’t have any
                                                                                            die within a certain term (for example
    look at the terms and conditions            to pay out (usually 4, 13, 26 or 52                                                   dependants, you will probably not
                                                                                            10, 15 or 20 years). If you live longer
    carefully, and check that it covers your    weeks). The longer the waiting period                                                 need life cover.
                                                                                            than the term, you get nothing. As a
    circumstances. For example, you would       you agree to, the lower your premiums
                                                                                            couple, you can also take out term
    not need unemployment cover if you          will be, so it is important you find out
                                                                                            cover in both your names, with the
    were not working when the policy was        what income you would get from your
                                                                                            policy paying out on the first death
    taken out, and some may not cover you       employer and other insurance products
                                                                                            only during the term.
    for pre-existing medical problems.          during the waiting period.
                                                                                            Different types of policy include:
                                                Also known as permanent health
                                                insurance (PHI).                            ■   family income benefit – a policy
                                                                                                that pays out an income rather than
                                                Check – this cover may be available
                                                                                                a lump sum
                                                through your employer, so make
                                                sure you check what your employer           ■   increasing policy – where cover
                                                offers first.                                   and premiums rise over the years
                                                Check – this cover might not be             ■   decreasing policy – where cover
                                                available to you if you have existing           and premiums fall over the years,
                                                health problems or a dangerous job.             and
                                                                                            ■   renewable policy – which lets you
                                                                                                extend the original term.

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 Protecting your                             Most mortgage lenders will insist you          You need to tell your insurer if you        Your cover may be affected or
                                             take it out when you take out a                extend your property, for example with      cancelled if you leave your home empty
 possessions                                 mortgage (as it protects their asset if        a loft conversion or conservatory, as       for a period of time (often as little as 30
 There is insurance to protect your home     something happens to the property).            this will change the rebuild cost.          days) or if you rent it out.
 and your possessions. Products              But you don’t have to take out cover
 designed for these circumstances                                                           Check – you may find that you get a         If you rent your property through a
                                             with that particular lender.
 include:                                                                                   better deal if you buy buildings and        registered social landlord such as a
                                             Leasehold and rental properties should         contents insurance together from the        housing association, they may offer an
 ■   buildings insurance                     be covered by the freeholder, but              same insurer. Combined buildings and        ‘insurance-with-rent’ scheme. This is
 ■   contents insurance                      always check.                                  contents insurance is often known as        where you can pay for your contents
                                                                                            home or household insurance.                insurance at the same time as your
 ■   motor insurance, and                    Policies often cover damage to fixed
                                                                                                                                        rent. Ask your landlord if they provide
                                             fittings such as baths and kitchens,           Contents insurance
 ■   pet insurance.                                                                                                                     a scheme like this.
                                             as well as garages, sheds and
                                                                                            This covers the loss of or damage to the
 Buildings insurance                         greenhouses, although they may                                                             If you have a child at university and
                                                                                            contents of your home. It includes items
                                             exclude walls, fences, drives and                                                          living away from home, check if your
 If you own your own home (with or                                                          within your home as well as items you
                                             swimming pools.                                                                            policy will cover their possessions too.
 without a mortgage) and it is a freehold                                                   take outside, for example cameras,
                                                                                                                                        They may need to take out their own
 property, you should take out buildings     If you live on a flood plain you may find it   jewellery and laptops. Most policies will
                                                                                                                                        contents insurance.
 insurance. This covers the cost of          difficult to get buildings insurance. If you   cover you against theft and fire, and
 rebuilding your home if it is damaged by    already have cover for flood damage,           give you the option to insure against       Check – many insurers will offer
 fire, flood or subsidence, The rebuilding   the insurer should continue to offer it to     accidental damage.                          discounts if you have a burglar alarm
 cost is usually between a third and a       you, although they may increase your                                                       and/or window locks, or if you’re a
                                                                                            You’ll need to let the insurers know
 half of the value of your home. You can     premiums, the excess, or both. See the                                                     member of a Neighbourhood Watch
                                                                                            of any high-value items you want
 check whether you have enough               Environment Agency’s website to find                                                       scheme.
                                                                                            covered, such as expensive jewellery
 buildings insurance through the             out if your property is at risk of flooding
                                                                                            or camera equipment. Insurers may
 Building Cost Information Service           – see www.environment-agency.gov.uk.
                                                                                            require proof of purchase or valuation
 (BCIS) website – see www.bcis.co.uk.        Buildings insurance does not cover             certificates, so keep these safe and
                                             your belongings. These need to be              take photographs of the items. If they
                                             insured separately with contents               refuse cover altogether, contact an
                                             insurance.                                     insurance broker, who will be able to
                                                                                            find you a specialist insurer.

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 Motor insurance                                  You pay a premium depending on                Pet insurance                                  Check – in choosing a policy, think
 The law says you must have motor                 various factors including the make of         There are three kinds of cover:                about the likelihood of your pet
 insurance if you own a vehicle, whether          car, engine size, your age and where                                                         developing a recurring or ongoing
                                                  you live. The higher the excess you are       ■   life-long – it will pay out for specific   illness, as some breeds are prone to
 you drive it or not, unless you have a
                                                  willing to pay, the lower your premium            conditions (injuries, illnesses etc) for   certain conditions.
 statutory off-road notification (SORN)
                                                  will be.                                          the life of your pet
 for it. Some policies cover the                                                                                                               Check – always make sure you
 replacement or repair of your vehicle,           You’ll also tend to get lower premiums        ■   mid-level – it will pay out for specific   disclose any key relevant information.
 depending on the circumstances of                if you park your car somewhere secure             conditions for the life of your pet but
 an accident.                                     (in a garage overnight for example) or if         with a limit on how much will be paid
                                                  you have a clean driving licence.                 out for any particular condition, and
 If you are refused cover on the grounds
 of health or age, a specialist insurer           Depending on your claims history, the         ■   time-limited – it will pay out only for
 may be able to help.                             insurance company may offer you a                 12 months per condition.
 You can choose from three levels                 no-claims discount. Some companies            All policies are renewable on an annual
 of cover:                                        allow you to pay a sum to guarantee this      basis, so the insurer may discontinue or
                                                  discount. Bear in mind you are paying to      vary the terms and conditions of cover
 ■   third party – this is the minimum            keep the no-claims discount and not to        at the renewal date. And in all cases the
     legal requirement and covers you             keep your premiums at a certain level         cover continues only if you keep paying
     if you injure a third party (such as         – they may still rise, for example due to a   the premiums.
     innocent bystanders, passengers              general increase in prices. They are also
     or property), but does not cover             usually transferable to another insurer.      Policies vary, but as well as an agreed
     damage to your vehicle                                                                     maximum payout for vets’ bills and
                                                  If you use a comparison website, check        medication, some will pay for you to
 ■   third party, fire and theft – covers         the level of cover you are being offered,     advertise if your pet has been lost, or for
     third-party injuries and liabilities, and    as the cheapest policy is not always          kennel or cattery fees if you suddenly
     also fire and theft to your vehicle, but     the best.                                     have to go into hospital. In some cases
     not accidental damage to your
                                                  Check – don’t forget that motor               it will also cover the cost of making
     vehicle, or
                                                  insurance does not usually cover you          good damage caused by your pet.
 ■   comprehensive – covers third-party           for breakdowns, so if you want this you       It does not generally cover routine
     injuries and liabilities, as well as fire,   will need to take out separate                upkeep items such as annual
     theft and accidental damage to your          breakdown cover.                              vaccinations, boosters, nail clipping,
                                                                                                spaying and neutering.

12                                                                                                                                                    moneyadviceservice.org.uk         13
 Protecting your health                       You can buy cover on a full medical         To keep costs down you could choose       Dental insurance
                                              underwriting basis. This means you will     to pay more of the bill, or you could     This is a health cash plan that focuses
 Every UK resident is entitled to free
                                              be asked questions about your health        choose cover that only applies if NHS     on dental care. Most dental plans pay
 healthcare from the NHS, but you may
                                              and, based on the information you           services are not available within a       for twice-yearly check-ups, as well as
 want health insurance so that you can
                                              provide, the insurer will decide the        certain timeframe.                        for treatments such as crowns, root
 have a choice in the level of care you
                                              conditions of your cover.                                                             canal work, bridges and dentures up to
 get, where you get treated, when you                                                     Check – find out if your employer
 get treated, or if you didn’t want to use    You can also apply for cover on a           provides health insurance as part of      an agreed maximum each year. More
 the NHS.                                     moratorium basis. This means you will       your benefits package.                    serious work such as oral cancer,
                                              not be asked any questions about your                                                 surgery and serious dental abscesses
 Products designed for these                                                              Health cash plans                         are often excluded.
                                              health, but if you have suffered from any
 circumstances include:
                                              health conditions in the last five years,   These provide limited cash sums           Check – some of these policies are not
 ■   private medical insurance                these will automatically be excluded        towards everyday healthcare bills.        transferable between dentists.
                                              from cover for a stated time.               Different policies cover one or a
 ■   health cash plans, and
                                                                                          combination of types of healthcare,
                                              You can’t take out cover now for
 ■   dental insurance.                                                                    such as dental care, optical care,
                                              treatment you know you’re going to
                                                                                          physiotherapy, or stays in hospital.
 Private medical insurance (PMI)              need. If you’ve had health problems in
                                              the past, your insurer may also refuse to   Check – some policies have age
 This covers medical treatment and
                                              cover them. If you are asked to disclose    restrictions and will cover you only if
 usually means you can get treated
                                              these when applying for the insurance,      you are under a certain age (often 65).
 more quickly than on the NHS. The
                                              you must do so or you could invalidate      If you’ve had health problems in the
 cover you get will vary, but basic private
                                              your policy.                                past, the cash plan may not pay out on
 medical insurance may pay the costs of
                                                                                          certain types of healthcare. Some
 most in-patient treatments (tests and        It is unlikely to cover the treatment of
                                                                                          plans also apply qualifying periods,
 surgery) and day-care surgery.               chronic medical conditions, dental care,
                                                                                          which means they will not pay for any
 Some extends to out-patient treatments       pregnancy, HIV/AIDS, fertility treatment,
                                                                                          treatment you have in the first few
 (such as visits to consultants or            mental or psychiatric conditions, and
                                                                                          months of the policy.
 specialists).                                treatments you may choose to have,
                                              such as cosmetic surgery.

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 Other types of insurance                  For example, some companies selling             Check – legal expenses cover is               Most travel insurance plans will cover
                                           motor and household contents                    sometimes sold as an add-on to other          medical bills for up to £1m, and often
 Other insurance you may consider
                                           insurance may include this cover as a           types of insurance (such as buildings         more, as well as pay for an emergency
                                           free add-on, while others give you the          insurance). Check to see if this is the       air ambulance to bring you home for
 ■   legal expenses insurance              option of attaching the cover for an            case when buying other insurance              treatment in the UK.
                                           extra premium. If it’s been automatically       products.
 ■   travel insurance                                                                                                                    It can also cover you against other
                                           included and you don’t want it, you can
                                                                                           Travel insurance                              mishaps while you’re abroad, from theft
 ■   extended warranties                   opt out of it.
                                                                                                                                         to flight delays. Make sure you read the
                                                                                           If you travel without travel insurance,
 ■   long-term-care insurance, and         After-the-event cover is taken out at                                                         policy summary information for
                                                                                           you run the risk of losing out if things go
     business insurance.                   the time you seek legal assistance.                                                           exclusions – there are bound to be
 ■                                                                                         wrong. For example, if you’re uninsured
                                           Often you will arrange this through your                                                      some, such as hazardous activities like
                                                                                           and you lose your luggage, you may not
 Legal expenses insurance                  solicitor but specialist brokers sell it too.                                                 skiing or diving. Some policies do not
                                                                                           be able to recover the cost of it. Also, if
 This is a way of protecting yourself      It costs a lot more than before-the-                                                          cover scheduled airline failures, civil
                                                                                           you suffer serious injury, you may end
 against some of the costs involved        event cover, and covers only the one                                                          unrest or terrorist attacks. If you have a
                                                                                           up having to pay for medical treatment.
 when funding a legal dispute, which       legal dispute.                                                                                policy which does not cover these risks,
 can be very expensive. There are two                                                      If you are a UK resident you are entitled     you can take out separate insurance.
                                           Check – you should check your
 basic types of legal expenses                                                             to free or reduced-cost, State-provided
                                           insurance policy documents carefully to                                                       High-value items such as bicycles and
 insurance: before the event and after                                                     healthcare when visiting Switzerland or
                                           make sure you understand what you                                                             laptops are often excluded, so you may
 the event.                                                                                a European Union (EU) country, as long
                                           are covered for, the level of cover and                                                       want to check whether these are
                                                                                           as you have a European Health
 Before-the-event cover often              any limitations that apply.                                                                   covered under your contents
                                                                                           Insurance Card (EHIC) – see Useful
 provides for legal advice helplines, as                                                                                                 insurance. Also check whether your
                                           Check – both types of cover normally            contacts on page 31. In many other
 well as the costs of appointing                                                                                                         employer offers travel insurance as part
                                           allows the insurer to withhold or               countries outside the EU, healthcare
 solicitors, expert witnesses and                                                                                                        of your benefits package and, if so,
                                           withdraw funding if there isn’t a               can be very expensive. But you should
 representation if the claim goes to                                                                                                     what this covers you for.
                                           ‘reasonable prospect of success’,               remember that the EHIC is not a
 court. It can be bought along with        which usually means that you have a             substitute for travel insurance, as it only   If you are refused cover on the grounds
 some insurance policies.                  51% or better chance of winning or              covers you for when you are ill.              of health or age, a specialist insurer
                                           defending your case.                                                                          may be able to help.

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 Check – you won’t usually be covered       Extended warranties                           You can, buy cover from the retailer or     Check – some warranties offer no
 for pre-existing medical conditions, or    When you buy something new, the law           from specialist insurers, insurance         more protection than your entitlements
 you may have to pay extra to get them      requires it to be of satisfactory quality.    brokers, banks or other financial           under normal consumer protection
 covered. If you don’t disclose those       Usually, the manufacturer or retailer will    institutions.                               legislation, and in some cases you may
 medical conditions, any claims that you    guarantee it for a period of time,                                                        already be covered by your contents
                                                                                          You can also buy insurance for
 make may be rejected because you           generally a year. An extended warranty                                                    insurance and have no need for a
                                                                                          appliances you already own but which
 didn’t tell the insurance company.         covers you for repair costs after this                                                    warranty. Also, think about how likely
                                                                                          are not currently insured, subject to
 Travelling against a doctor’s advice may   guarantee has expired.                                                                    the product is to break down.
                                                                                          their age and condition. With this type
 also invalidate your cover.
                                            These policies cover repair costs             of cover there is usually a ‘no-claim’
 Check – travel insurance is often          following the breakdown of most               period immediately following the start of
 included as part of a packaged bank        household appliances, and most also           the cover during which claims for
 account. If you’re offered one of these    cover parts and labour. There is usually      breakdown will not be met.
 products, make sure the cover is what      a maximum amount payable during the           Some warranties are not insurance
 you want and that you are insured for      life of the policy and some may have a        contracts. These usually have names
 an appropriate amount.                     limit on each claim.                          such as ‘service contracts’. With service
                                            If the appliance cannot be repaired,          contracts, your payments are put into a
                                            ‘new for old’ policies will replace it with   pool that is used to pay claims. In many
                                            a new one of similar specification, or        cases this pool is protected, so that if
                                            pay a cash equivalent if a similar model      the retailer goes bust your claims would
                                            is no longer available. Other policies will   still be paid. But that is not always the
                                            make good up to the current value of          case. You should receive information
                                            the product after depreciation.               when you take out the contract about
                                                                                          whether or not you would be covered in
                                            Some policies provide additional              the case of insolvency.
                                            benefits, such as accidental damage or
                                            frozen food spoilage.
                                            Policies usually exclude misuse,
                                            non-domestic use and cosmetic items
                                            such as damaged paintwork or trims.

18                                                                                                                                           moneyadviceservice.org.uk     19
 Long-term-care insurance                    Check – when you die, the income           You may want to think about taking out
                                             usually stops. Capital is only repaid if   specialist insurance, such as loss-of-
 As you get older, you might develop                                                                                              Key points
 health problems that could make it          you’ve chosen a plan that provides         cash insurance, trade-credit insurance,
                                             some death benefit (a lump sum paid to     or goods-in-transit insurance.
                                                                                                                                  ■   Always check the exclusions
 difficult to cope with everyday tasks. So                                                                                            before you take out a policy.
 you may need help to stay in your own       your estate).
                                                                                        For more information on the different
 home or you may have to move into a                                                    types of insurance available for small
                                                                                                                                  ■   Always tell your insurer if your
                                             Business insurance                                                                       circumstances change.
 care home.                                                                             businesses, see the ABI guide
                                             If you are an employer, you are legally
 The state may provide some help                                                        Insurance for Small Businesses: a         ■   You must keep up payments
                                             required to have employers’ liability
 towards the costs of this care,                                                        guide to protecting your business             for the insurance cover to remain
                                             insurance, and if you use motor
 depending on your circumstances, so                                                    – see Useful contacts on page 31.             in force.
                                             vehicles for your business, you are
 always check with your local council        legally required to have third-party       If you work from home, you may need
 about any support it offers.                motor insurance.                           a specialist insurance policy. Contents
 You can buy long-term-care insurance                                                   insurance will not cover any loss of
                                             There are also many types of optional
 when you have been medically                                                           office equipment, nor will it provide
                                             business insurance available, and what
 assessed as needing care, regardless                                                   public liability cover.
                                             you may need will depend on the type
 of age.                                     of business you have.                      Check – your standard contents
 You buy it with a lump sum, and it pays                                                insurance may not be valid if you work
                                             If you have business premises, a
 out a regular income for your care for                                                 from home, although most policies can
                                             suitable premises insurance policy will
 the rest of your life. You’ll be assessed                                              be extended to cover this.
                                             cover you for damage from various
 medically to see how much you must          causes. However, this only covers the
 pay for your chosen level of income.        physical building, so you will also need
 In the past it was possible to buy          separate insurance cover for stock,
 pre-funded insurance in case you            machinery and contents.
 needed care in the future. These
 contracts are no longer available to buy
 but you may have an existing policy.

20                                                                                                                                        moneyadviceservice.org.uk       21
 Key things to
 think about
 Buying insurance                           You can buy insurance directly from        Be aware that some insurance                 Once you’ve discussed what you need
                                            insurers over the phone, internet or by    companies will automatically renew           and answered the questions you have
 Generally, firms selling insurance and
                                            mail, and also from banks, building        your policy at the renewal date,             been asked about yourself and what
 those providing insurance cover have
                                            societies, insurance or mortgage           particularly if you’ve bought it online or   you want to insure, you will be given key
 to be regulated by the FSA, or be the
                                            brokers, financial advisers, or            you pay by Direct Debit. They will send      policy information. Even if you decide to
 agent of a regulated firm.
                                            supermarkets.                              you a reminder but it’s up to you to         buy insurance direct from an insurer,
 There are some exceptions, for example                                                check the price and be happy with any        you will still be given this information.
                                            Check the policy information to find
 the sale of extended warranties on                                                    increase. If you’re not, then shop
                                            out exactly what you are and are not                                                    This information will set out what the
 non-motor goods (such as on electrical                                                around. It may be worth going back to
                                            covered for. Nearly half of people don’t                                                policy does and does not cover, any
 goods) where the person selling the                                                   your original provider and telling them if
                                            know what their insurance covers, so                                                    limits or restrictions, and any other
 insurance is also providing the goods.                                                you find the same level of cover
                                            always ask questions if you’re not sure                                                 important features you need to know
                                                                                       cheaper – they may match the price to
 Before you buy, always check what          about anything.                                                                         before you make up your mind.
                                                                                       keep your custom.
 insurance cover you already have. You
                                            Always shop around. Some policies                                                       Make sure you get this information, and
 may have taken it out yourself or you
                                            may be cheaper than others, but            Information you’ll be                        that you read and understand it. Ask
 may be covered through policies taken
                                            they may not offer the same level          given                                        the provider or insurance company to
 out by your employer as part of your
                                            of protection. Always compare like                                                      explain anything you don’t understand.
 benefits package, or it may be part of                                                If you decide to buy through a broker,
                                            with like.                                                                              You can also use this information to
 your bank account deal.                                                               they will give you details about the         shop around and compare like with like.
                                            Comparison websites will ask you           service they are offering you. This will
 Some types of insurance (such as legal
                                            several questions and then provide you     tell you:
 expenses cover or travel insurance) are
                                            with quotes from various brokers and                                                    Cooling-off period
 often sold as an add-on to other types                                                ■   whether they’re offering you advice
                                            insurers. None of the websites cover                                                    You have the right to change your mind
 of insurance or financial products, or                                                    or just information about the product
                                            the entire market, and some larger                                                      and have your money back within a
 other goods such as holidays or travel
                                            insurers are not represented on any of     ■   whose insurance policies they offer      certain period (usually 14 or 30 days)
 tickets. Make sure that you know what
                                            the websites, so you may wish to               (it may be from one company or           after arranging any insurance contract.
 you’re paying for and that any cover you
                                            contact them directly. The comparison          many), and
 buy as an add-on meets your needs.
                                            website you use should contain a list of
                                            the brokers and insurers represented
                                                                                       ■   how much you’ll have to pay for the
                                            on its panels.                                 service.

22                                                                                                                                         moneyadviceservice.org.uk         23
                                                                                          Your questions
 Disclose the full facts                     Don’t under-insure                           Question                                  Question
 ‘Material’ facts are facts that you ought   The average home contains over               How do I find an                          Are there different types
 reasonably to know are relevant to the      £40,000 in clothes, kitchen gadgets,         insurance broker or                       of premium available?
 insurer’s decision whether to offer you     electronics and furniture. It is up to you
 insurance cover and at what price, so       to insure accurately. If you underinsure     company?
 they must be disclosed. This                your goods – so you insure your
 information will form the basis of a        contents for £20,000 when they are           Answer                                    If you take out insurance to cover your
 contract between you and the insurer.       worth £40,000 – the insurer would only       Your friends or family may recommend      income or borrowing, you will be
                                             be obliged to pay out up to £10,000 if       one, or you can find one along your       offered two main types of premium:
 If you are asked a specific question, you
                                             you made a claim under this policy (ie       high street. Alternatively there are          Reviewable premiums – premiums
 must respond honestly, and it is no                                                                                                ■
                                             half of what you claim for).                 organisations that can help you – see         may start off relatively low, but will
 defence to say that you didn’t realise
                                                                                          Useful contacts on page 31. But always        be reviewed in the future and may
 that the fact was material. If you don’t
 disclose material facts, your policy may    Check the exclusions                         check that the firm you use is on the         increase every few years or so to
                                             The most common reason for insurers          FSA Register – call 0845 606 1234 or          take account of your changing
 be invalidated and you won’t be able to
                                             to reject a claim is because the policy      go to www.fsa.gov.uk/fsaregister.             circumstances.
 make a claim.
                                             didn’t cover what people thought it did.                                                   Guaranteed premiums – these tend
 So make sure you disclose everything,                                                    Question                                  ■
                                             Check the policy documents to find out                                                     to be more expensive, but the
 however irrelevant it may seem at the
                                             what is and isn’t covered.                   What if I know what I                         premiums are usually guaranteed for
 time, for example any unspent
 convictions (however small) should be                                                    want and don’t need                           the life of the policy. Always check
 declared. And if you are buying home                                                     advice?                                       how many years the guarantee is for.
 insurance, you need to declare any                                                                                                 Think about which option is best for
 unspent convictions of anyone in the                                                     Answer                                    you, both now and in the long run.
 household too. (Spent convictions are
                                                                                          UK firms that sell insurance without
 those that by law do not have to
                                                                                          advice still have to follow the FSA’s
 declared because so much time has
                                                                                          rules. But the onus is then on you to
 passed since the conviction.) For more
                                                                                          decide whether or not the policy is
 information see www.unlock.org.uk.
                                                                                          suitable. You may have less grounds for
 Also check with your insurer if and                                                      complaint if the policy turns out to be
 when you need to tell them of changes                                                    unsuitable.
 in circumstances.

24                                                                                                                                           moneyadviceservice.org.uk        25
 If things                                                                               Next steps
 go wrong
 Making a claim                              Complaints                                  Step 1   Check that any insurance you’ve already got covers
 Make sure you check your policy details     If you have a complaint about the                    you for what you think it should.
 to see if you can claim. Check your         advice you received when you bought
                                                                                                  When looking to buy insurance, first check whether
 excess against the cost of replacement      your insurance policy, or your claim has
                                                                                                  you might be covered under any policy you already
 or repair, to see if it’s worth it.         been rejected, contact the firm you
                                                                                                  have, or through your employer’s benefits.
                                             dealt with. They have a procedure to
 Contact your insurer to tell them you
                                             follow when dealing with complaints.
 want to make a claim. Your policy
 documents should tell you how to            If you’re not satisfied with their
 contact them. Keep brief notes of all       response, you may be able to take your      Step 2   Get a few quotes from different companies. Use this
                                                                                                  information to shop around and compare the features
 telephone conversations with your           complaint to the Financial Ombudsman
                                                                                                  as well as the costs. Make sure you compare like with
 insurers, so you can refer back to them     Service. The firm should give you
                                                                                                  like, and don’t buy on price alone. You can do this
 if you need to. Keep any receipts or        the details of this free service – see
                                                                                                  yourself or get the help of an insurance broker.
 invoices that you’ve already paid, as       www.financial-ombudsman.org.uk.
 you may need these as part of your
 claim. If you’ve used an insurance          Compensation
 broker, they may be able to help you.       If a UK-authorised financial services       Step 3   Get financial advice if necessary. There are a number
                                                                                                  of organisations that can give you a shortlist of
 If you’ve been a victim of a crime you      firm, such as an insurance company or
                                                                                                  financial advisers in your area – see Useful contacts
 should also get in touch with the police    insurance broker, is unable, or likely to
                                                                                                  on page 31.
 as soon as possible (and you may need       be unable, to pay claims against it, you
 a letter from your tour operator or hotel   may be able to get compensation from
 if it happened abroad).                     the Financial Services Compensation
                                             Scheme. There are limits to the             Step 4   Always ask questions if you’re not sure about
 Don’t exaggerate. False information on
                                             protection the FSCS provides to                      anything, especially questions concerning your own
 a claim can lead to the whole claim
                                             you depending on the type of claim.                  personal circumstances.
 being rejected.
                                             The service is free to claimants – see
                                                                                                  Make sure that you disclose all relevant information
 See the insurance pages on the Your         www.fscs.org.uk for more details about
                                                                                                  about who or what is being covered, otherwise your
 money section of our website for more       FSCS protection for insurance.
                                                                                                  policy may not be valid if you make a claim. And make
 information – see Useful contacts on
                                                                                                  sure you tell the insurance company if your
 page 31.
                                                                                                  circumstances change.
 You have a right to complain if your
 claim is rejected.

26                                                                                                                            moneyadviceservice.org.uk   27
 Jargon buster

 Some key words and phrases explained.                                                 Exclusions                                 Joint life
                                                                                       Specific conditions or circumstances       Life cover that pays out if one of two
 Activities of daily living                 Breakdown cover                            listed in the policy for which the         insured people dies. Note, though, that it
 (ADLs)                                     Insurance that provides help to            insurance company will not pay claims      only pays out once, so if both people die
                                            motorists who are stranded at the          or benefits.                               together there will only be one payout.
 These include keeping mobile,
 washing, dressing or feeding yourself.     roadside when their vehicle has broken
                                            down. Also called ‘roadside assistance’.   Home or household                          ‘New for old’ cover
 Actuary                                                                               insurance                                  An insurance policy where the insurer
                                            Claim                                      This is the common name for buildings      will replace old damaged appliances
 A person professionally trained to apply
                                            A formal notice to an insurance            and contents insurance when they are       and possessions with new ones
 probability theory and statistics to
                                            company requesting payment under           bought together.                           when you claim, rather than making
 insurance and related fields.
                                            the terms of a policy.                                                                deductions for wear and tear.

 Assurance                                                                             Insurable interest
                                            Cover                                                                                 Non-disclosure
 Strictly speaking, ‘assurance’ is for a                                               Having an insurable interest means that
                                            The protection given by insurance.         you would suffer a financial loss should   Failure to disclose material (relevant)
 policy for an event that will happen,
                                                                                       the insured event take place.              facts.
 for example a life assurance policy that
 pays out on death, whereas ‘insurance‘     Excess
 is for things that may or may not                                                     Investment-backed life                     Policy
 happen. However, nowadays the              The amount you agree to pay before
                                            your insurer pays the rest of the bill     insurance                                  The printed legal document stating the
 term ‘insurance’ is more often used                                                                                              terms of the insurance contract.
 to cover both.                             (for example the first £100 of a claim).   Life insurance that also acts as an
                                            The higher the excess you offer to         investment. It includes whole-of-life
                                            pay, the less the policy will usually      insurance, with-profits bonds,             Policyholder
 Beneficiary                                cost you. Beware, some policies            endowment policies and maximum
                                            charge an excess per clause rather                                                    The person who owns an insurance
 The person named in a life insurance                                                  investment plans.
                                            than one overall.                                                                     policy.
 policy to receive the insurance money
 on the death of the insured.

28                                                                                                                                       moneyadviceservice.org.uk          29
                                                                                        Useful contacts

 Pre-existing condition                    Specialist insurer                           Money Advice Service                           On the Money Advice Service
                                                                                                                                       website you can find:
 A medical condition that you know you     A company that deals with specialist         For advice based on your own
 already have before your policy starts.   risks – for example contents insurance       circumstances or to order other guides         ■   a health check to help you build up
                                           for high-value or rare items, such as fine                                                      some good financial habits and
                                                                                        Money Advice Line: 0300 500 5000
                                           art, antiques or vintage cars.                                                                  reach your goals
 Premium                                                                                Typetalk: 1800 1 0300 500 5000
                                                                                        Calls should cost no more than 01 or 02
                                                                                                                                       ■   comparison tables to compare
 The amount your insurer requires you
 to pay for insurance.
                                           Underwriting                                 UK-wide calls, and are included in inclusive       mortgages, pensions and savings
                                                                                        mobile and landline minutes. To help us            accounts, and
                                           The process of assessing risks and           maintain and improve our service, we
                                           premiums.                                    may record or monitor calls.                   ■   a pension calculator to see how
 Renewable term                                                                                                                            much income you might get when
 insurance                                                                              Other Money Advice Service guides                  you retire – from what you save now
                                           Waiver of premiums                                                                              or in the future.
 Insurance for a specified period,                                                      ■ Borrowing money
 offering you the right to renew at the    A way of insuring your life insurance
                                                                                        ■   Credit cards                               Go to moneyadviceservice.org.uk/
 end of the term for another term or       monthly premiums in case you cannot
 terms, without a medical examination.     work because of ill health (but not          ■   Credit unions
                                           unemployment or redundancy). The
                                                                                        ■   Getting financial advice                   Call rates to the following
                                           insurer pays the premiums for you until
 Single premium                            the end of the policy term, you reach a
                                                                                                                                       organisations may vary – check
                                                                                        ■   Making a complaint                         with your telephone provider.
 You pay the whole premium up front,       specified age, or you are able to return
                                           to work. You usually buy it as an optional
                                                                                        ■   Making your budget work for you            Financial Services Authority (FSA)
 often borrowing the amount together
 with the loan you are insuring – as       extra with a life insurance policy.          ■   Problems paying your mortgage              To check the FSA Register or to report
 opposed to a regular premium, which                                                                                                   misleading financial adverts or
                                                                                        ■   Your bank account
 you pay each month for the duration of                                                                                                promotions.
 the cover.                                                                             ■   Your pension – it’s time to choose
                                                                                                                                       Consumer helpline: 0845 606 1234
                                                                                        For more titles, call us or go to              Minicom/textphone: 0845 730 0104

30                                                                                                                                              moneyadviceservice.org.uk        31
 For factsheets and                      Finding an adviser                       Other services                            Complaints and
 information on insurance                or broker                                Building Cost Information Service
 Association of British Insurers (ABI)   British Insurance Brokers                (BCIS)                                    Financial Ombudsman Service
 information zone                        Association (BIBA)                       A house-rebuilding-cost calculator.       South Quay Plaza
 Factsheets available on most types of   For insurance guides and Find a Broker   http://calculator.bcis.co.uk/             183 Marsh Wall
 insurance including:                    service.                                                                           London E14 9SR
 ■   life insurance                      0870 950 1790                            Environment Agency                        0800 023 4567 or 0300 123 9123
                                         www.biba.org.uk                          For flood-risk maps.                      www.financial-ombudsman.org.uk
 ■   income protection insurance, and
 ■   household and property insurance.   The Institute of Insurance                                                         Financial Services Compensation
 020 7600 3333                           Brokers (IIB)                            European Health Insurance Card            Scheme (FSCS)
 www.abi.org.uk                          For an insurance broker who is an IIB    (EHIC)                                    7th floor Lloyds Chambers
                                         member.                                  To apply for a European Health            Portsoken Street
 Guide on insurance for small                                                     Insurance Card.                           London E1 8BN
 businesses                              www.iib-uk.com
                                                                                  0845 606 2030, pick up a form             0800 678 1100 or 020 7741 4100
 www.abi.org.uk/publications             MyLocalAdviser                           at the Post Office, or go to              www.fscs.org.uk
                                         For an independent financial adviser,    www.ehic.org.uk
                                         mortgage broker or financial
                                         intermediary in your local area.         UNLOCK
                                         www.mylocaladviser.co.uk                 For a detailed guide for consumers with
                                                                                  unspent convictions and for a list of
                                         Unbiased.co.uk                           insurance brokers who specialise in
                                         For an independent financial adviser,    insurance for people with unspent
                                         mortgage adviser or solicitor in your    convictions.
                                         local area.                              www.unlock.org.uk

                                         The Personal Finance Society
                                         Find a financial adviser in your
                                         local area.

32                                                                                                                                moneyadviceservice.org.uk   33
This guide is part of our
everyday money series.
Other titles in this series include:
■   Borrowing money
■   Making a complaint
■   Making the most of your money

All our guides are available from:
Our website
Money Advice Line
0300 500 5000

If you would like this guide
in Braille, large print or audio
format, please call us on
0300 500 5000 or Typetalk
on 1800 1 0300 500 5000.
Calls should cost no more than 01 or 02
UK-wide calls, and are included in inclusive
mobile and landline minutes. To help us
maintain and improve our service, we
may record or monitor calls.

April 2012
© Money Advice Service April 2012 Ref: VRSN0017b