The UK’s booming insurance industry is the fourth largest in the world, according to Statista, and offers an enormous range of insurance products.
Among the most common types of general insurance that you may have at some point in your life are home, car, travel and pet insurance. Here we explain when you might need these types of insurance policies, how they work, and what they do – and don’t – cover.
Home insurance
The two main types of home insurance that you might need are buildings and contents insurance. As their name suggests, the former covers the building itself, while contents cover insures the items you have within your home.
Here, we explain both types of home insurance policy, but for more detail read our article, Your essential guide to home insurance.
Buildings insurance
What is it?
Buildings insurance covers the physical structure of your home. The average buildings insurance policy currently costs around £110 a year, according to comparison website MoneySuperMarket, but the actual price you pay will depend on your property and the specific risks it may face, such as whether it may be prone to flooding or subsidence, for example.
What does it cover?
Buildings insurance is designed to pay out enough for repairs or to rebuild your property if it’s damaged or destroyed. Policies will usually include things like outhouses such as garages and sheds, as well as fences, pipes, cables and drains up to a certain limit.
The type of scenarios that may be covered by buildings insurance include damage to your home as a result of: fire, smoke, explosions, flood, storms, frozen or burst pipes, subsidence, natural disasters, fallen trees, lamp posts, aerials or satellite dishes, theft, attempted theft, vandalism or malicious damage, vehicle or aircraft collisions.
Do you need it?
If you have a freehold property with a mortgage, you will usually need to have buildings insurance as part of your mortgage agreement. Mortgage providers may offer you buildings insurance as part of their package, but you should also be able to find your own policy on the open market by checking comparison websites.
If you have a leasehold property with a mortgage, you may either need to have buildings insurance with a certain insurer, or the freeholder might take out the policy and pass the cost of it on to you.
If you are living in a rented property, it’s the landlord’s responsibility to arrange and pay for the building’s insurance policy.
Is there anything else you need to know?
If you have a property in an area that is at a heightened risk of any of the scenarios we list above, for example, if your property is situated on a flood plain, you may have to get an enhanced level of protection, which means it’s very likely that you will be paying more for your policy.
Contents insurance
What is it?
Contents insurance is designed to provide cover for your possessions and those of the people you live with. The average cost of contents insurance in the UK is around £56 a year, according to MoneySuperMarket, although this will vary depending on your personal circumstances and, of course, the value of items in your home.
What does it cover?
At a minimum, most policies will cover any damage or loss of possessions caused by flooding, storms, fire or theft. Some policies may also cover accidental damage, but you will usually have to pay more for this as a policy add-on
When you buy a policy, you will usually be asked to detail how much your possessions are worth, and if you have any big-ticket items, such as TVs, jewellery or electronics. Some policies will apply a new for old clause, meaning the insurer will pay for the replacement of an old item at the price of a new version. However, check your policy’s wording as you may find it only pays up to the amount your item was worth when it was lost, damaged or stolen.
Do you need it?
While there’s no legal obligation to have contents insurance, it’s worth considering how you would go about replacing your belongings if you lost them. It could work out a lot cheaper, in the long run, to have a contents insurance policy than to have to replace all of your belongings.
Is there anything else you need to know?
Many policies carry an excess, which is the amount you are liable to pay in the event of a claim before your insurer will pay out.
If you underestimate the value of your possessions, then your insurer will not pay any more than your estimation. So it’s really important that you make sure you are comfortable with the level of cover you have opted for.
Some insurers also provide you with the option of insuring the possessions that you frequently take away from your home, such as mobile phones, jewellery and cameras, but this will usually come at an additional cost.
If you need buildings insurance or contents insurance, or both, you can use our home insurance comparison tool to find the best deal for you.
Car insurance
It’s a legal requirement for anyone driving a vehicle in the UK to hold one of the three main types of car insurance. You will also need insurance for any car you own that is parked on the street, driveway or in a garage, even if you aren’t currently driving it.
There are three different levels of car insurance: Third party, third party, fire and theft and comprehensive.
Do you need it?
Yes, if you own or drive a car in the UK, you need some form of motor insurance, with third party cover being the minimum level of cover.
Third party car insurance
What is it?
Third party is the minimum level of car insurance and provides you with cover for any damage you may cause to someone else’s car or any injury to another person.
What does it cover?
Essentially, third party insurance covers the costs of any damage or injury that you might cause to other vehicles or people (or the third party that the policy name refers to). With this type of cover, damage to your own vehicle or personal property isn’t covered. The policy is simply designed to payout, if needed, to repair damage to the other vehicle, or in the case the driver or person(s) involved in the accident are injured
Is there anything else you need to know?
With this level of insurance, your vehicle is not covered against damage or loss in the case of an accident, so you will need to cover this cost yourself, which depending on the value of your car could be expensive. Generally, it’s only worth considering this level of insurance if your car is worth very little and you do not have anything of value in it.
It’s worth noting, too, that the lowest level of cover doesn’t necessarily mean the cheapest policy. Over the years, insurers have identified drivers looking for low levels of cover as the ones most likely to have an accident, so the premiums are often higher anyway. Uswitch carried out some experiments on the costs of the different levels of insurance and found that a 50-year-old driver with more than 15 years’ worth of experience, a no claims bonus, driving a Ford Fiesta and living in Coventry would pay the following for the different levels of cover:
- Comprehensive: £221
- Third party, fire and theft: £218.68
- Third party only: £229.
Third party, fire and theft car insurance
What is it?
This is the next level up from third party cover and provides an additional layer of protection for your vehicle against damage or loss from theft or fire.
What does it cover?
You will have all the elements of third party cover with the additional protection against the costs of:
- Replacing your car if it is stolen and can’t be recovered
- Repairing any fire damage to your car, which will usually cover both arson and accidental fire
- Repairing damage to your car after a break in, which will usually cover any locks that were damaged during attempted theft or the cost of stolen items such as a radio.
Is there anything else you need to know?
With this level of insurance, your vehicle is still not covered against damage or loss in the case of an accident, so you will need to cover this cost yourself.
Comprehensive car insurance
What is it?
Also known as fully comprehensive insurance, this cover provides protection for both of the above scenarios, as well as complete cover for your car. The average cost of comprehensive cover in the UK is around £430 per year, according to the Association of British Insurers (ABI), but this can vary considerably from person to person.
What does it cover?
Generally, comprehensive insurance will cover damage to your car and yourself, as well as provide compensation to a third party if you are involved in an accident. So unlike the last two types of car insurance, if you are involved in an accident, you can claim to repair the damage to your car.
With comprehensive insurance, there is a wide range of extras that your insurer might offer as part of your policy, while others may provide them at an additional cost. For example, these might include transport home after an accident, vandalism cover, a courtesy car, child seat cover, windscreen cover and breakdown cover.
Is there anything else you need to know?
Not all comprehensive policies were created equal, so it’s really important that you fully understand what is included in your policy and what is excluded. If you are looking to bring the price of your insurance down, read our article 10 practical tips to reduce your car insurance premiums.
If you are looking at buying a car insurance policy, or yours is up for renewal, use our car insurance comparison tool to help you compare costs.
Gap Insurance
What is it?
Gap insurance is designed to bridge the gap in value between what you paid for your car, or owe on a car if you took out finance on it, and the amount that the insurance company is willing to pay you if your car is stolen or written off. When you buy a new car, its value usually starts to fall the minute you drive it off the forecourt, with estimates that it will depreciate by up to 60% in the first three years, according to the AA.
What does it cover?
There are three key types of Gap insurance:
- Back to invoice will pay you the difference between what your insurer is willing to pay you and either the amount you paid as detailed on the invoice when you bought the car or the remaining amount you owe on car finance
- Vehicle replacement will pay you the difference between the amount your insurer pays out and what you would pay to buy the car today or if you bought your car second hand, the amount you originally paid for it
- Contract hire is only for people that lease their car, with no buying option available. With this cover, your insurer will pay the current market value of the car and the gap cover will cover any remaining payments on the lease.
Is there anything else you need to know?
You will need to have a fully comprehensive car insurance policy in place before you get gap cover. If you only have a third party policy, you won’t be covered as your car insurer won’t pay anything towards the replacement of your car.
For a payout with Gap insurance, your car needs to have been entirely written off or stolen, not just damaged. It also won’t cover any additions you’ve made to your car since you bought it, such as alloy wheels or sound systems.
Travel insurance
What is it?
Travel insurance is designed to pay for the cost of loss, medical treatment or trip alteration while you are on holiday, either abroad or in the UK.
What does it cover?
Every travel insurance policy is different and will include varying levels of cover. However, most policies will include:
- Medical cover: This covers the cost of medical treatment, which if you are in a country that pays for their healthcare could reach millions of pounds
- Holiday cancellation: If you have to cancel your holiday for a reason covered by the policy, this will reimburse the cost of your trip
- Travel delays: If your flight is delayed or cancelled, your travel insurance policy might allow you to get some or all of your money back
- Lost, stolen or damaged belongings: If you lose or break something or an item is stolen while you are away, most travel insurance policies will cover some if not all of the cost of replacing them
- Personal liability: If you accidentally hurt someone or damage their property while you are away, your travel insurance might cover their medical costs or the replacement of their items.
Do you need it?
Having travel insurance is not a legal requirement when you go on a trip, but people often spend considerable sums of money on their holidays, and frequently take valuable items with them, such as phones, cameras, and laptops. Buying travel insurance can provide you with some peace of mind that you’ll be financially protected if anything happens to you or your belongings while you’re away, or if your trip is cancelled.
Is there anything else you need to know?
There are a number of different levels of cover and policies available. For more details on travel insurance and to ensure you choose the best policy for you, have a look at our article Everything you need to know about travel insurance.
Pet insurance
What is it?
Owning a pet usually involves a few trips to the vets, and pet insurance is designed to help cover the costs of any veterinarian treatment your pet might need.
What does it cover?
Pet insurance policies will usually cover the cost of vet bills if your pet is injured or develops a medical condition. If the insurance is for a dog, it will usually include third-party liability cover, which provides financial protection if your dog causes damage or injury to people or property. Third liability cover isn’t usually included in policies for cats because they are considered ‘free spirits’ and therefore owners can’t be held liable for their actions.
Do you need it?
If you have a pet, it’s likely you will take them to the vets at some stage for an issue that isn’t just standard vaccinations, or a general check-up, so it could pay to have pet insurance. The average pet insurance claim is just over £800, so if you think you might struggle to cover these costs unexpectedly, then you might want to consider taking out a pet insurance policy if it’s affordable.
Is there anything else you need to know?
There are a number of different ways of insuring your pet, so for more information on this, have a look at our article Everything you need to know about pet insurance. You can compare pet insurance policies online using our pet insurance comparison tool.
Things to look out for when buying insurance
Before you buy an insurance policy, make sure you understand what you’re buying and whether you’re paying a competitive price for it. For example, if you need travel insurance when you book a package holiday, you might get it cheaper by shopping around rather than taking out the cover offered by the holider provider. Alternatively, you may be offered buildings insurance when you take out a mortgage and again, you may find it cheaper elsewhere. Generally, beware of taking out insurance at the same time as another financial product, and compare prices across the market that offer the same level of cover, with the same excess.
When you apply for any type of cover, make sure you answer all questions the insurer asks carefully and correctly, and any inaccurate answers could invalidate your policy.
Once you’ve bought the policy, check the details carefully, and remember you have 14 days to change your mind if you decide that a particular general insurance policy isn’t suitable for you. However, you may have to pay a small administration fee if you want to cancel in this timeframe.
Getting insurance with a criminal conviction
Your insurer will ask you a series of questions when you apply for insurance, and these usually include whether you’ve any previous criminal convictions. It’s always wise to answer honestly, or any claim you make may be turned down, as your policy will be considered invalid. Bear in mind, though, that if you’re received a policy caution, this does not need to be disclosed.
You also do not need to declare any ‘spent criminal convictions’ when you apply for an insurance policy. Convictions are ‘spent’ a period after the date of the conviction, and after that, they cannot affect your ability to get insurance. You can find out whether your conviction is ‘spent’ or not using the calculator on the Unlock website and if it is, you do not need to declare it when applying for insurance.
If you’re having difficulty getting insurance because of a criminal conviction you may want to talk to an insurance broker for specialised help. The British Insurance Brokers Association (BIBA) can help you find a broker here.
Other types of insurance
There are, of course, many more types of insurance than the core ones listed above that can offer you additional protection depending on your lifestyle, and personal needs, including:
- Private health insurance: A type of insurance that is designed to cover the cost of private health care should you need treatment. If you think you might want this insurance, have a look at our article Do I need private health insurance?
- Dental insurance: Not all dental treatment is provided on the NHS, so if you want peace of mind that any dental work you might need will be covered, you might consider dental insurance. We have more information about this in our article Do I need dental insurance?
- Critical illness cover: If you are diagnosed with certain serious illnesses or disabilities during your policy term, critical illness cover will pay out a tax-free lump sum to support you until you can get back to work. We provide more detail in our article Everything you need to know about critical illness cover
- Income protection insurance: This type of insurance protects your income if you aren’t able to work due to illness, have a look at our article Income protection explained for more information. It can be particularly useful for the self-employed
- Life insurance: There are a number of different types of life insurance, but generally they are aimed at providing your loved ones with some sort of financial support if you were to pass away. Our article What are the different types of life insurance? covers of the main options you might want to consider.
When to use an insurance broker
For general and fairly generic insurance policies, such as annual or single trip travel insurance, or home insurance, using a comparison service is often the best way to find and buy cover at a competitive price. However, you may want to speak to a broker if you’re looking to cover a particular item in your home insurance policy, for example, such as an antique collection, or if there’s been a problem with your property in the past, perhaps for example, it’s flooded, or it’s had subsidence.
The British Insurance Brokers Association (BIBA) can help you find a broker here or you can call them on 0370 950 1790.
You may want to speak to a broker if you’re buying protection, such as life insurance, income protection or critical illness, as these policies may need to be tailored to your specific needs. Using a specialist broker can be particularly useful if you’ve got a pre-existing health condition.
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