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This was the headline in the Mail on Sunday this Sunday. The article quoted radio presenter Danny Baker who thinks that insurance is a waste of money and encourages people to live in a constant state of anxiety.
Everyone has an opinion about insurance and the majority are not that positive. However it is when you do need to claim on a policy that you realise its worth.
I don’t mean the small claims for a lost or stolen phone or pair of sunglasses, I mean the big claims such as claiming on your medical travel insurance when you had a heart attack in America and then needed to be repatriated back to the UK, this could cost upward of £25,000. When you make this type of insurance claim, all of a sudden that travel insurance with medical conditions policy you paid £100 for seems very good value indeed.
The other insurance products looked at are below with why we don’t think these policies are a waste of money:
Critical Illness cover: This is generally sold alongside a mortgage and although, according to Institute and Faculty of Actuaries the chances of a 35 year old man being struck down by critical illness before they are 65 is one in seven and for women it is one in eight, if it is you that is struck with the critical illness and you are the main bread winner how are you going to pay the mortgage or feed your family if you don’t have a policy in place?
Income Protection Insurance: According to the Office of National Statistics the chances are, one in sixteen of us could be off work for six months or more through illness or disability. Premiums can be high for this type of policy, however with incapacity benefit being scrapped for new claimants and the replacement, Employment and Support Allowance only offering up to £100 per week depending on circumstance, if your employers don’t offer a good period of sickness on full pay then I would seriously consider taking out one of these policies, but do shop around.
Motor Insurance: The law states that you must have minimum of Third Party Only insurance cover if you drive or keep your vehicle on the public highway. So if you do want to have a car there is no getting away from this one.
Home Insurance: If you have a mortgage your lender will insist you have buildings insurance to cover the rebuilding cost of your property. Buying contents cover is up to you as is buildings insurance if you don’t have a mortgage, however you should think how you would manage if something like a burst pipe completely floods your home and you have to move out until the property dries out. Ask yourself how will you pay to replace what has been damaged or ruined and for the alternative accommodation you will need.
Life Insurance: If you have dependants it is always advisable to have some form of life insurance, you wouldn’t want to think of your family homeless if the main bread winner dies.
Now, if like Danny Baker you have a multi millionaire friend you probably don’t have to worry as they could always bail you out, and then if you have the earning capacity you will easily be able to pay them back once you are able to return to work. But unfortunately for the man in the street they don’t have this luxury, which is why making sure you have the correct insurance policy for your needs is so important. The key is to always shop around and don’t just depend on the comparison sites to do your shopping around for you, and always read the policy to make sure you are covered for what you think you are covered for, no matter how laborious you think it is.