Insurance gives you peace of mind, but it's important to take out the right cover - getting it wrong can cost you dear.
"Always choose an insurance policy based on the cover it provides as well as the cost of the premium," says Lee Griffin, spokesperson at gocompare.com.
"A cheap insurance policy, which doesn't provide the cover you need, is a waste of money."
Travel insurance
The biggie when it comes to travel insurance is having adequate medical and repatriation cover.
Although a European Health Insurance Card will take care of emergency treatment in most EU countries, it's not recognised further afield and costs can quickly stack up.
Griffin says that if you needed to be brought back from the US under medical supervision you could be hit with a bill for £50,000 plus.
As a guideline, travel policies should cover at least £2 million for medical expenses. You should also have, as a minimum, £1 million for personal liability, £3,000 for cancellations, £1,500 for baggage and £250 for cash.
Motor insurance
There are three levels of cover with motor insurance: third-party, which covers you if you cause an accident and is the legal requirement; third-party, fire and theft, which adds cover in the event of fire or the theft of your car; and comprehensive cover, which adds protection for accidental damage.
Which level is right for you will depend on your attitude but, as Griffin explains, will also be down to the value of your car.
"If you have a low-value car, third-party cover could be adequate and cheaper than taking out fully comprehensive insurance with a substantial compulsory excess," he says.
Home insurance
Underinsuring can be a problem with home insurance, with one-in-five of us underestimating the amount we need. But this can cause serious problems if you need to claim, as the insurer will scale back your payment.
For example, if you have £60,000 of contents but only take out £30,000 of cover, if you then make a claim for £10,000 the insurer might only offer you £5,000 as you're only half-insured.
To avoid this, think about the cost of all your possessions and if in doubt go for a policy that automatically covers everything. For your buildings cover, use the Association of British Insurers buildings insurance calculator abi.bcis.co.uk.
And never be tempted to be economical with the truth. "If you have to make a claim and you didn't disclose something initially that may affect your policy, your insurer can refuse to pay out," says Griffin.
This can apply to modifications to your car, pre-existing medical conditions on your travel insurance and lying on your home insurance about having approved locks fitted on your property.
SIGNS YOU'RE PAYING TOO MUCH
You've never switched provider
If you haven't compared your car or home insurance in the last year, chances are you're paying too much. According to gocompare.com, customers save an average of £211.94 on their car insurance and £145.79 on their home insurance compared with the renewal premium.
Your premium goes up every year
Insurance premiums rise every year, regardless of whether a claim has been made or not. But if you haven't made any claims, your no claims bonus should slow the rate of increase, and in the early years should even put your premiums in reverse.
The cover limits far exceed the value of your items
Some policies offer blanket cover to avoid the risk of underinsurance but if you appear to have a lot more cover than you need, chances are you're paying extra for it.
A discount on a car insurance premium as a reward for having not made a claim on the policy. The NCB is earned for every year of claim-free driving; a driver will earn another year’s NCB to a maximum of five years. The actual discount on the insurance premium will depend on the insurer. If you make a claim, your insurance company may reduce your discount by a number of years so you have to “earn” these over again or it may revoke the NCB entirely. Motorists can generally transfer their NCB across to another insurer and can pay an additional premium to protect it so should they have an accident, the NCB remains intact.
This is more usually a feature of car insurance but it can also crop up in contents, mobile phone and pet insurance policies. An excess is the amount of money you have to pay before the insurance company starts paying out. The excess makes up the first part of a claim, so if your excess is £100 and your claim is for £500, you would pay the first £100 and the insurer the remaining £400. Many online insures let you set your own excess, but the lower the excess, the more expensive the premium will be.
This type of insurance covers the structure and fabric of your property – the bricks and mortar, not the contents (for which you need contents or home insurance). If you have a mortgage, the lender will insist you have a suitable buildings insurance policy in place. Many lenders offer their own building insurance policies, but you don’t have to buy it from your own lender but you have the option of shopping around. The insurance covers you for the rebuilding costs, not the market value of the property.
Established in 1985, the ABI is the trade body for UK insurance companies. It has more than 400 member companies that provide around 90% of domestic insurance services sold in the UK. The ABI speaks out on issues of common interest and acts as an advocate for high standards of customer service in the insurance industry. The ABI is funded by the subscriptions of member companies.
