Why is it important?
Is there anything that can’t be insured?
It’s often said that you can bet on anything, all you need is someone to take the bet.
The world of insurance seems much the same. You can insure virtually everything that moves, quite a lot that doesn’t, and insurance companies are always coming up with new insurance products. There are very few insurance policies which are compulsory, so whether you get insurance is really down to you in most cases.
Car insurance is a legal requirement, of course, and then there’s employer’s liability insurance. Other insurance policies aren’t legally required but it’s difficult to do without them, for example most mortgage companies won’t lend without buildings insurance in place. Another example is liability insurance for tradesmen – it is now very difficult for contractors to get work on large sites, particularly publicly-funded projects, without it.
Some people swear by insurance that others consider unnecessary. It’s very much down to your individual approach to risk as to what insurances you take out. There’s a balancing act between the premiums you can afford, the risks that you think you might need to protect against.
In many cases there’s a straight financial argument. House contents insurance, for example, is a very competitive market so premiums are quite low. If you add up what you pay in premiums over a lifetime it’s a considerable sum, and many people think that their stuff isn’t that valuable, so they don’t bother.
But to make that decision, it’s important to calculate the exact value of what you are protecting. When people say that their possessions aren’t worth much, they don’t actually tot up all the little ordinary things like clothes, cutlery, toys etc. Most people, if they do total everything up, are shocked and surprised at how much it would cost to replace just their clothes, if there was a fire at their house.
Review your options
So everyone owes it to themselves to review their insurance every now and then, to make sure that they aren’t facing a risk that should probably be covered in some way. It’s also just as important to make sure you aren’t paying over the odds for cover or options that you just don’t need. After all, what we do and how we do it changes over the years and insurance cover needs to reflect your life as it is now, not a few decades ago.
The questions you need to ask yourself are:
Is this a risk that needs to be covered, i.e. is it more or less likely to happen to me?
Is there a way I can cover the risk without insurance?
If not, can I afford not to get insurance to cover it?
Finally, can I afford the premiums?
What do you need?
As an example of covering a risk without insurance, a friend of mine with plenty of lawyers in his family used to refuse legal cover on motor policies to save money. Nowadays legal cover is included in most motor policies at no extra cost, and many of the family lawyers have retired, so it doesn’t make sense not to have it.
Or when it comes to gadgets, like mobile phones, you might not want to pay an insurance premium if you are happy to buy a cheap replacement phone if yours is lost, broken or stolen.
Be aware that as things change throughout your life, your needs will change too. Someone who is in full-time employment may not need accident or serious illness cover; many employees have blanket policies covering all their staff. But those who start a business or become self-employed and still have people relying on their income, it’s an absolute must.
And health insurance may well become more attractive as we get older, particularly with the changes the NHS is going through at the moment.
To help you in your review of your insurance there’s a list of insurance products here. It’s not an exhaustive list, but it covers most of the common policies in use today. Take a look at the list anyway to see if it sparks any thoughts.