Insurance transfers specified financial risks to an insurer in exchange for a premium. The policy defines what is covered, excluded and what you pay toward a claim.
The cheapest policy may leave the risk you care about uncovered. Incorrect information can reduce or invalidate a claim.
The useful points
- Premium is the price; excess is the amount you contribute to a claim.
- Read exclusions, limits, waiting periods and definitions.
- Insure events you could not comfortably absorb, while avoiding unnecessary duplicated cover.
- Tell the insurer about material changes and keep evidence for claims.
Match cover to the loss you could not absorb
Insurance is most useful for a plausible loss that would seriously damage your finances. Policy limits, exclusions, excesses and definitions determine whether the cover actually responds. Cheap cover can be poor value if the excess is unaffordable or the important event is excluded.
- Describe the risk first, then compare policies.
- Check single-item, location and usage limits.
- Avoid paying twice for cover already supplied by a bank account, employer or another policy.
Make disclosure and claims easier
Insurers price the information supplied, so answer questions accurately and report material changes. Keep receipts, serial numbers, photographs and policy documents somewhere accessible. After an incident, limit further damage where safe, record evidence and contact the insurer without unnecessary delay.
- Do not guess when an application question is unclear.
- Know the compulsory and voluntary excess together.
- Use the complaints process and Financial Ombudsman route where applicable.
Cheap policy, costly excess
One phone policy saves £3 a month but has a £250 excess. For a £300 phone, the practical benefit may be very small.
What this means for you
Use the same steps with your own figures. Change one assumption at a time and check that essentials still fit before committing.
Common traps
- Choosing a voluntary excess you cannot afford
- Assuming travel or phone cover is automatic
- Auto-renewing without checking needs and price
- Withholding important information
A realistic action list
- Name the loss you need covered
- Compare cover and excess
- Store policy and evidence where you can find them