Most households carry several insurance policies, but few people could say exactly what each one covers or whether they still need it. Some cover is a legal requirement, some protects against costs that would be impossible to absorb, and some adds little value at all.
V5 Solutions has written this guide around a few simple questions about your circumstances. Answering them honestly gives a clearer view of what each policy does and where households often overpay.
Do You Drive or Keep a Car?
Motor insurance is compulsory for anyone driving on public roads in the UK. The legal minimum is third party cover, which pays for injury to other people and damage to their property. It does not repair or replace your own vehicle.
Above the minimum sit third party, fire and theft policies, and then comprehensive cover, which also pays for damage to your own car. Comprehensive is not always the most expensive option, because insurers set prices according to the risk profile of the people who buy each level. Comparing all three levels side by side is the only way to know.
A vehicle that is not insured generally needs a Statutory Off Road Notification (SORN) and must not be used or parked on public roads. Driving without insurance can lead to a fine, penalty points and the vehicle being seized.
Do You Own or Rent Your Home?
Homeowners
Buildings insurance covers the physical structure, including walls, roof and fixtures, against events such as fire, storms, escape of water and subsidence. Mortgage lenders normally make it a condition of the loan. Leaseholders should check their lease, as the building is often insured centrally by the freeholder.
Renters and homeowners alike
Contents insurance protects your possessions. It is optional, but a useful exercise is to add up the rough cost of replacing everything you own, from the sofa to the clothes in your wardrobe. Most people are surprised by the total. Check whether the policy covers items taken outside the home, as this can remove the need for separate gadget cover.
Does Anyone Depend on Your Income?
If a partner or children rely on what you earn, or a joint mortgage would become unaffordable without you, life insurance is something many people look at. Level or decreasing term policies run for a fixed period, for example until the mortgage is repaid, and tend to cost far less than whole-of-life policies. Some employers provide a death-in-service benefit, which is worth checking when thinking about how much cover might be needed.
Could You Manage If You Could Not Work?
This question is often overlooked. Income protection insurance replaces a proportion of your earnings if you cannot work because of illness or injury, typically after a deferred period that you choose. The longer the deferred period, the lower the premium. It is worth checking your employer's sick pay arrangements. For people who are self-employed or would only receive Statutory Sick Pay, the gap can be large.
Critical illness cover is different. It pays a one-off lump sum if you are diagnosed with one of the conditions listed in the policy, whether or not you can keep working.
Are Gadget and Pet Insurance Worth It?
Standalone gadget insurance is frequently sold at the point of purchase, when you are least likely to compare prices. It is worth checking whether a contents policy or packaged bank account already provides cover.
Pet insurance is more nuanced. Vet bills can be very high, but policies differ widely. Lifetime cover resets the claim limit each year, so it can continue to pay for ongoing conditions. Maximum benefit and time-limited policies cap what you can claim for each condition, and accident-only cover excludes illness altogether.
How Can You Reduce What You Pay?
- Compare quotes at every renewal. Under FCA rules, home and motor insurers cannot charge an existing customer more than an equivalent new customer, but a different insurer may still be lower.
- Paying annually, where possible, avoids the interest that monthly instalments often include. Our article on building an annual bills calendar explains how to save for renewals.
- A higher voluntary excess usually lowers the premium, but it needs to be an amount you could genuinely pay if you claimed.
- Answer every question accurately. Incorrect details can invalidate a claim.
This article is general information, not financial advice. For free, impartial guidance on each type of cover and your own situation, visit MoneyHelper. If an insurer rejects a claim and you disagree, Citizens Advice can explain your options. You can also find more ways to ease pressure on your finances in our guide to understanding the numbers in your budget.
