Protection
Protection
Protection
Many of us know someone who has died to young, or even heard of someone's battle to survive an serious illness. Anyone who's seen a family deal with these things will know that the financial implications can be devastating.
We never think it will happen to us but sometimes it does and while protection insurance can't stop the unthinkable from happening, it can make handling the consequences a little easier.
If you need medical treatment, it can pay for private healthcare, and replace some of your income if you can't work. If you die, insurance can pay a lump sum to the family you leave behind.
In this section, we explain the main things you can insure, how it works and things to think about to help you decide whether you need insurance. Our Jargon buster will also help to make insurance clearer for you.
What is insurance?
Insurance is a way of protecting yourself and your belongings against a particular adverse event, for example, a burglary, or losing your income because of illness. If this happens, insurance will pay out an agreed amount, or an amount to cover the damage, as appropriate. Of course, it may not happen, but you have to decide whether you're willing or able to take that risk. Some insurance, like motor insurance, is compulsory - you have to have it if you drive.
How does it work?
The amount you pay for insurance will be based on the information you give the insurance company (the underwriter) and the type of risk you want to insure. Insurance companies use underwriting criteria, for example, where you live, if you smoke or what type of activity you would like to be covered to help them work out the price (premium) of the insurance.
You might find that some insurance companies may not be able to give you a price for the cover you need. This could be because that particular insurance company doesn't offer insurance for the type of risk you want to insure (for example things like antiques or vintage cars). If you want this type of insurance you might have to go to a company that specialises in this type of insurance cover.
The insurance company agrees to pay out if the event which you're insuring against happens. For example, your travel insurance policy may pay out for loss of luggage. It is important that you give the insurance company the correct information when buying insurance as incorrect information might affect your claim.
You pay either a sum for the whole year (or sometimes longer), called a single premium, or a regular premium, usually monthly, for the policy. You can choose which company's policy to buy yourself or you can let us help you choose.
Types of insurance
We provide a brief outline of the types of insurance here, but if you'd like more information, visit the Association of British Insurers' (ABI) Information zone website. The ABI represents the interests of the UK's insurance industry and provides information for consumers and firms.
What are pure protection and general insurance?
Pure protection insurance includes:
- term assurance (life insurance);
- critical illness insurance;
- income protection insurance;
- payment protection insurance - includes elements of pure protection and general insurance.
General insurance includes:
- motor insurance;
- household insurance;
- some travel insurance health cover; and pet insurance.
