Covering Yourself With Insurance

By Liza Mathers

Although we assume it will never happen to us, accidents will happen and illness

can strike. Ensuring that you're adequately insured for the unknown makes it easier

to deal with the events life may throw at you.

Many people consider insurance to be a waste of money, as you could end up paying hundreds of pounds of premiums and yet never make a claim. But although you could get nothing but peace of mind - which alone is worth the price to some - if you do have to make a claim, you'll be glad you bothered getting cover.

This article attempts to examine the main types of insurance available, what suits your needs, and how to ensure you don't pay over the odds.

Arranging Cover

Insurance works by offering you cover against injury or loss in return for a monthly, annual, or one-off payment called a premium. The insurer calculates your premium by assessing the risk of something happening to you - such as your home being flooded - and what it will cost to right the damage.

The higher the likelihood of an event occurring, and therefore of you making a claim, the greater your premium.

Deciding what insurance you need

Some types of cover are compulsory, such as buildings insurance for those with a mortgage or third-party cover for motorists. But the majority of insurance isn't compulsory; it simply brings peace of mind and makes life easier if disaster strikes.

When deciding whether you need non-compulsory cover, consider the impact of something happening to you and whether you could cope if it did. For example, if you were burgled could you afford to replace all your belongings? If not, you need contents insurance.

The cover you opt for is also dictated by what you can afford. Draw up a short list of the insurance you would buy if money were no object and rank it in order of importance, with the cover you have to buy at the top. After compulsory cover, most people opt for life assurance, but this isn't relevant if you don't have dependents. Consider your needs as well as cost.

When checking whether you've got enough cover, remember that most insurers state a maximum limit they will pay out in event of a claim: Check whether this would cover your loss.

Disclosing information to the insurer

You have to fill out an application form to obtain cover. This involves answering a series of questions, depending on the type of insurance you are buying.

Answer truthfully, even if you know this will bump up your premiums. For example, if you are applying for home contents insurance and the insurer asks if you are a smoker, don't lie and say you aren't if you are. Even though being a smoker increases your risk and your premiums, tell the truth because if you lie, the insurer may refuse to pay out on a claim. It's better to pay higher premiums to ensure you are covered.

If you have pre-existing medical conditions, mention them to the insurer or broker: Don't wait to be asked. It's better to be safe than sorry.

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