Insurance and protection are not always at the front of our mind, but they are vital for the security and future wellbeing of you, your property, and your family. 2023 could well be a bit of a tough year financially for a lot of people and insurance tends to be in the crosshairs when it comes to savings. So, what insurance and protection should you be thinking about in the coming year?
Do you need insurance and protection?
This is both an easy and difficult question to answer. Firstly, unless you have a personal fortune to keep you going no matter what, you need some sort of insurance. However, it is a little more difficult to decide what you need. Of course, with the current rise in the cost of living and the economy not looking great for at least few months, you probably want to make your insurance and protection as cost effective as possible and appropriate for your needs. So, let’s take a quick look at the main kinds of insurance and protection so you can start to make a decision.
Before we go on though, our experience is that sometimes people are not fully aware of what protection they need because they have never really needed to understand what each area covers. So, I suggest you read through this and then take the advice in the last paragraph to refine things.
Oh, one more thing before you read on. This is a very broad article, and it uses generalisation regularly. Insurance is about your personal circumstances, so this guide is only a starting point, speak to a professional before making a final decision.
What you need to think about
The base line for insurance is that it is about protecting the people and things in your life. You can often choose the level you protect them to, and most people choose to go higher than their basic needs. However, you need to know what the ‘value’ of the thing you are protecting is first to make a decision. The reason value is in quote marks is that we are talking about people and value seems a terrible word to associate with that. However, their ongoing needs have a cost and that is what I mean by value. So, here we go:
Nobody likes to think about the worst happening, but you should probably start with what would happen to your family if it did. Ideally you want to be in a position where your debts (including mortgage if you have one) are paid off. Many people also try to make sure their surviving family have a nest egg to help them move on with their lives. Even of you have no dependents, you should still consider life insurance to cover things if you are suddenly no longer around.
Buildings and contents insurance
The first thing to mention here is that if you have a mortgage, your home will likely need to be insured as an expectation of your agreement for the loan. Secondly, despite them usually being bundled together, they are two different things. Home insurance covers exactly what it says in the name. It is protection if something physically happens to damage your home. Ideally it should be for enough to have the property re-built entirely.
Contents insurance is everything in and around your home. So it will cover all you’re the possessions in the home, usually anything in sheds, outhouses and so on, and sometimes particular items such as laptops and mobiles and even cash, when out of the home. There are always additions and exclusions when it comes to contents insurance and policies vary so it’s important to get it right. One thing people often do is underestimate the value of replacing the content of their home so you need to do a proper inventory and work on replacement value.
Whether you choose accidental damage cover is another question. I suggest you consider it because the cost is usually quite small and replacing some easily damaged items such as computers, game consoles and TVs can be an expensive loss.
Remember, if you rent you current home, you will still want insurance and it may be in your contract to have it.
This is very different from the cover offered in conjunction financial products such as loans that only covered your payment and that had such a bad press a few years ago. Income protection will cover you if you are ill or in an accident. It will rarely cover you for the full amount of your lost salary, but it should be enough to help keep you going until you can work again.
If you are self-employed or a company director and you not working would severely impact your business, then you may want to think about keyperson insurance. It protects the company by compensating for income lost by the illness or death of a person of someone key to the profitability of the business.
This is to cover you for burst pipes, accidental damage, small fires, broken windows and so on. It’s usually relatively low cost, can sometimes be tagged on to house and contents insurance and it is often included to a basic level.
This varies quite a lot from provider to provider and in cost. If you can afford it, then it is well worth looking at as it often covers dental and optical issue that are not covered by the NHS and sometimes preventative and alternative treatments.
Specialist Insurance for activities or equipment
If you go base jumping, like to climb mountains, race motorcycles or fight alligators in your spare time, all the above kinds of insurance are unlikely to cover you. Make sure you check what you are covered for and get additional insurance if you need it. Similarly, you will probably find that very expensive equipment for hobbies such as photography and specialist gear for things like cycling and skiing are not covered by your content insurance unless you added them as an additional item.
Here is what I suggest. Go back through the list and, as a minimum, look at life, income protection and house and contents. Now work out the amount you would need them to pay out if the worst happened. Don’t skimp though and be practical about things like contents replacement. Think worst case scenario, it’s not fun to do, but it is the safest option. This will give you your minimum requirement list.
Now make a second list of what is important to you beyond the basic needs. For example, emergency cover may be of higher importance if you have an older property. Remember your specialist equipment, jewellery and so on and list them separately.
Once you have this information, see a specialist broker. Let’s sit down and go through your list and see what is going to work best for you.
Insurance and protection should be treated as a ‘must have’ not an add on. You may not need everything, but you will need some protection in case things go wrong.
Call us and let’s see how we can help.