Ensuring Your Insurance Is Right for You
The blunt reality of insurance is that insurance companies are businesses and as such they aim to make a profit. The onus is therefore on the buyer to get right type of cover and the right level of cover and, of course, to provide the insurance company with any relevant information needed to assess the price of the premiums. Let’s look at these one at a time.
The right type of cover
First of all you need to decide what, in your life needs to be insured. This could be anything from your jewellery to your pets to your health to your income. Then you need to look at what your options are for insuring them. For example, these days it may be possible to cover consumer electronics under your home insurance or through a specialist policy. Which one is right for you will depend on your particular circumstances. Sometimes you may find that you need more than one form of cover to give you the security you need, for example, if you are self employed, you may benefit from income protection cover, payment protection cover and critical illness cover, which are all essentially different elements of the same general concept.
The right level of cover
Depending on your situation this can be a prime example of easier said than done. If you’re a student moving into halls/a student flat then you’ll probably have a fairly good idea how much your belongings are worth and hence what sort of level of cover you need. If, however, you’re an adult with a house full of possessions, of which you’ve long since lost track, then deciding on the right level of cover can be a bit more complicated. Having said that, you probably have a good idea of what really matters to you, so take that as a starting point. Remember that insurance, like life, is a work in progress and so it’s important to keep tabs on your level of cover and adjust it upwards or downwards as your circumstances change. For example, if your only reason for having life cover is because you have a mortgage, you can lower the level of your cover as you pay off your mortgage. It should, however be noted that even though overpaying for excessive cover carries a financial cost, it is generally far less of a potential problem than underpaying for inadequate cover.
Making yourself an attractive client - ethically
Ultimately insurance is a business of risk and reward and, hence, anything you can genuinely do to lower your risk to insurers is likely to be rewarded in the form of lower premiums. An obvious example of this is giving up smoking, which is, understandably, looked on very favourably when taking out health and life insurance. Sometimes it is possible to improve your premiums, if only slightly, with a little finesse. For example, in some forms of insurance, for example car insurance, occupation can be taken into consideration. Therefore if you have a job which can reasonably be described in different ways, then you may want to do some research into which definition is likely to get the best response from an insurance company. At all costs, however, avoid the temptation to tell “little white lies” even if “everyone else is doing it”. For example, if a teenager is the main driver of a car then they need to be listed as such, even though it’s almost certainly going to make a sharp difference to the premiums. Leaving aside moral issues, the simple reality is that insurance companies may take your word about facts when they are taking your money for premiums, but in the event of a claim, they may well decide to do their own fact checking and that is when you could find yourself facing significant problems.
There are other providers of Payment Protection Insurance [Short-Term Income Protection] and other products designed to protect you against loss of income. For impartial information about insurance, please visit the website at www.moneyadviceservice.org.uk.