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General insurance includes house insurance, car insurance, contents insurance, travel insurance. In fact, general insurance is a catch all term for everything but life assurance. General insurance covers you against things that might happen but you would rather they didn't!
- What is general insurance?
- Why do I need insurance?
- What insurance is compulsory?
- Do I already have insurance?
- Is it worth shopping around?
- What's wrong with not insuring full value?
- What should I insure?
- What do I need to check out?
- What happens when I make a claim?
- Who do I complain to about my insurer?
What is general insurance?
General insurance covers events that may or may not happen, such as accident, fire or theft, as opposed to life assurance, which covers an event that will definitely happen sooner or later, such as retirement or death.
The aim of taking out any insurance policy is to compensate you following a loss so that you are, in general, as well off - but no better off - than you were before the loss occurred.
An insurance policy is a legal contract and your rights as the holder of the policy will depend entirely on what is written in the contract and on any endorsements which may be added to it.
Why do I need insurance?
You MUST have insurance whenever the law requires you to have it and you SHOULD have insurance if an event could happen to you that would create a loss that you could not afford; for example, if a tile fell from your house and injured someone who then claimed thousands of £s for their lost earnings or if your house burnt down and you were faced with rebuilding costs.
In some cases, the State provides insurance by, for example, paying incapacity benefit if you are unable to work due to illness. You may also find that your employer provides certain health insurance cover, such as income protection insurance or private medical insurance.
However, it is highly unlikely that any third party will provide for your general insurance requirements. Arranging insurance cover for your home, your car, your pet and your holiday is going to be up to you.
What insurance is compulsory?
Compulsory insurance is insurance that you are obliged to effect. The most common legally-required insurance that individuals must have is motor insurance. All motorists are required by the Road Traffic Act to have in force an insurance policy in respect of liability for bodily injury to or damage to the property of third parties arising out of the use of a motor vehicle on a road.
This third party insurance means you are covered for any liability for injuries to other people, their property, and their cars, caused by the use of your car while it is on a public road. In reality most of us opt for "third party, fire & theft" policies, which cover third party risk, fire damage and the theft of our car, or "fully comprehensive" policies which cover accidental damage to our own vehicle as well.
If you run a business you are legally required to have insurance to cover you if one of your employees is injured or becomes ill as a result of working for you. The law also requires that you exhibit a certificate of employers' liability insurance at each place of work. However, if all you are doing is employing a home help or cleaner you do not need this kind of insurance. For your peace of mind, it may be worth checking that your home contents policy covers you for any kind of accident they may have while working for you.
There are other compulsory insurance policies but, as an individual, it is unlikely that you will be required by law to take out other insurances. However, if you have a mortgage your lender will almost certainly require, as part of its mortgage offer, that you have house buildings insurance to cover your home.
Do I already have insurance?
You should start by checking what insurance cover you already have. Even if you have purchased no insurance policies yourself you may find that you already have some insurance. For example, if you purchase your holiday or air tickets with a credit card you may qualify for "free" travel insurance. Standard cards' protection may be limited but many "gold" or "platinum" cards provide comprehensive travel insurance.
Equally, if you have purchased house contents or household insurance on an "all-risks" basis, you may find that your possessions are also insured outside the home, which, if this is the case, means, for example, that you can comfortably resist the blandishments of the mobile phone salesman who is trying to persuade you to take out an insurance policy for your new iPhone.
Is it worth shopping around?
Many people have no insurance while others, who do have insurance, are chronically under-insured. Figures compiled by the Centre for Economics & Business Research for insurer MORE TH>N suggests that the value of the contents of the average home reached £45,341 in July 2005, up from £44,447 in 2004.
Could you realistically afford to replace your belongings if you lost them in a fire or to a thief? Not taking out the right insurance cover is a false saving. You should also remember to make allowance for 'wear and tear' on clothing and household linen.
You can shop around for a policy but you have little or no chance of influencing the terms of a particular contract.
Remember it is your money and your insurance policy, check the small print. For example, in most household contents policies insurers have the choice of settling claims by replacement, repair or cash payment without giving the same choice to policyholders. However, although you may have to accept the cover that an insurer is willing to offer, it is worth shopping around for one obvious reason - price. While you may not be able to influence the terms and conditions an insurer offers you, you may well find that another insurer is prepared to offer you the same or similar cover at a lower price.
What's wrong with not insuring full value?
You need to make sure that your insurance cover matches the value of your possessions. Obviously an insurance policy with a lower level of cover is going to cost you less but this will prove to be a painfully false economy in the event that you have to make a claim.
For example, if you have contents worth £50,000 but only insure them for £25,000 you will only have bought 50% of the cover you need. It is unlikely that you would receive a full settlement from the insurance company in the event of a claim. In fact it is likely that you will be offered no more than the pro rata percentage of cover - so if you have only 50% of the cover you should have, you may only receive 50% of what you are trying to claim.
What should I insure?
If you run a car, you must, by law, have at least third party motor insurance. How much more cover you have will depend on you, your car and your wallet. If you own your own home or have a mortgage you should also have buildings insurance to cover the cost of repairing or rebuilding your home if it is damaged by unforeseen events (as detailed in the insurance policy - there may be certain exceptions such as acts of God and terrorism).
What other general insurance policies you take out will depend on what you feel it is important to protect and also how much you can afford to spend on insurance policies. Home contents insurance will cover items such as clothes, furniture, electrical goods, carpets, and so on. It should cover the cost of replacing lost or damaged possessions.
If you have a family pet you must decide whether you can afford vets bills or whether you should insure against them.
Holiday insurance is important, especially if you are travelling abroad. It will pay out if you unexpectedly have to cancel your holiday; are taken ill while away; injure somebody or damage somebody else's possessions; lose your own possessions; and so on.
Most travel insurance has traditionally been sold by travel agents but they may charge between two and three times as much as other insurers for cover that is often not as comprehensive. If you are a frequent international traveller, making two trips a year or more you will probably be better off arranging an annual travel insurance contract rather than cover for each journey. Check the cover, some annual contracts will not insure you for winter sports.
Accident, sickness and unemployment (ASU) insurance or a basic mortgage payment protection policy will pay out a regular amount for a limited period, usually up to a year, if you are unable to work for health reasons or as a result of redundancy.
You also have the option of a variety of health-related insurance policies. More and more people are looking to private healthcare insurance as a way of getting round NHS waiting lists and you may wish to consider permanent health insurance to cover illness or disability which would prevent you from working. Critical illness cover will pay out, usually after a short deferred period, if you are diagnosed with one of a number of specified life-threatening conditions, such as cancer or heart attack while long-term care insurance covers the cost of being looked after - usually in old age - if you can no longer manage on your own.
What do I need to check out?
Obviously you need to know what risks, items and events are going to be covered and, just as important, what's not included by the insurance policy you are thinking of buying. You should also understand how much the policy will pay out if you make a claim: will you receive full replacement cost, second hand value, a set cash sum, etc. The policy is likely to include an "excess". This is the initial amount of any claim that you must pay yourself. It is usually the case that agreeing to pay a larger excess will mean that you pay a lower insurance premium.
Once you have a clear idea of what cover you require you need to shop around on price. The premiums you will be quoted by insurance companies may vary with a variety of factors, depending on what kind of insurance you are looking for: where you live, your job, your car, the amount of funding to be protected, and so on - make sure premiums are all quoted on the same basis and that they include insurance premium tax. You may be able to make some savings if you pay by direct debit. However, you may end up paying more if you pay monthly rather than yearly.
It is also worth checking how cover is affected if you miss a payment. Is there a period of grace? Do you get some of your money back if you cancel the policy? Above all, when the time comes to renew your insurance, do check it is still good value.
What happens when I make a claim?
The first point to remember, with any insurance policy, is that no claim will be paid if you are found to be in breach of any stipulated obligations under the policy, which leads on to the second point, when you first receive your policy - read it! Make sure it provides the cover you expect it to provide and that there are no conditions that you are not aware of. For example, household insurance policies may stipulate the type of locks you must have on windows and doors.
Having suffered a loss, if you are made a cash offer by your insurer do not automatically accept it. Wear and tear may be much less than the insurer or its loss adjuster assumes. A loss adjuster is an independent expert called in by the insurance company to review the value of your claim. You may not be required to deal with a loss adjuster but if you are then it may be worth calling on the services of a loss assessor, an equally independent expert who is called in by the policyholder (you) to review the value of the claim and dispute any suggestion by the insurer or loss adjuster that it should be lower. For claims running to several thousands of pounds, it may well make financial sense to pay the professional fees required.
Bear in mind that items such as jewellery or antiques may have appreciated in value. If an item is separately insured, do not accept anything less than the specific amount detailed in the policy. If you do not want a replacement item which is being offered to you, you should demand cash. If cash is offered, do not accept anything but the full replacement value.
Who do I complain to about my insurer?
On 14 January 2005 general insurance came under the auspices of the Financial Services Authority (FSA). Previously general insurance ran under a voluntary system of regulation operated by the General Insurance Standards Council (GISC). The FSA has specific responsibilities to consumers, aiming to help people become better informed about financial matters so that they can manage their financial affairs more effectively. The FSA's consumer helpline is available Monday-Friday, 8.00am-8.00pm, on 0845 606 1234 and the watchdog also has a dedicated consumer-orientated website - http://www.fsa.gov.uk/consumer
If you have a complaint about your insurance policy that your insurer is unable to resolve, you may be able to take your problem to the Financial Ombudsman (0845 080 1800), which can help with most financial complaints.
The Financial Services Compensation Scheme has the power to compensate consumers in the event of the failure of any authorised firm under the Financial Services and Markets Act. Policyholders are protected if they are insured by authorised insurance companies under contracts of insurance issued in the UK, or in some cases in the EEA, Channel Islands or Isle of Man. The Scheme covers, among other financial products, compulsory, general and life insurance and is triggered if an insurance company goes out of business or into liquidation.
The maximum level of compensation you can receive from the Scheme for a claim against an insurance company depends on the type of insurance policy although the FSCS may arrange to transfer your policy to another insurer, provide a new policy or, if this has not been possible, provide compensation.
06 August 2007 © Moneyextra.com
Our senior editor Robin Amlôt recommends you should consider taking independent financial advice before acting on any article. Please contact us for help with your individual circumstances if any assistance is required.