Insurance protects you and your belongings from the financial cost of something going wrong

It can’t stop bad things from happening. But if something unexpected does happen – such as a burglary, a car accident, or an illness while you’re on holiday – it means you won’t have to pay the full financial cost on your own.

Insurance is all about managing risk. There are some instances where insurance is compulsory. For others, it will depend on your circumstances and how much risk you’re prepared to take.

Here’s an introduction to the most common types of insurance to help you work out which ones you might need.

Types of insurance

Home insurance

Car insurance

Life insurance

Travel insurance

Health insurance

Home insurance

If you own a home, you’ll likely need to have building insurance as a condition of your mortgage. This won’t cover you for general wear and tear. But it will cover the cost of repairing or rebuilding your home if it’s damaged by storm, floods, fire, lightning or subsidence.

Both homeowners and tenants can take out contents insurance. Though not a legal requirement, it covers your possessions in case they’re damaged, stolen or lost. For example, if there were a fire, flood or burglary at your home, it would cover the cost of replacing your belongings.

If you take out buildings and contents insurance, many insurers offer discounts if you combine your policies, so, this could help you get a cheaper deal.

Car insurance

When you drive, you’re legally required to have motor insurance. Third-party cover applies to any damage to another person’s car or property. 

But it won’t cover damage to your car. If you rarely use your car, or you don’t think it’s worth much, then you may decide this is enough. A third-party fire and theft policy not only covers other people, but also includes coverage for your own car, in the event it is stolen or damaged by fire.

Fully comprehensive cover is the highest level of insurance you can have. It includes all the cover of a third-party fire and theft policy, but also protects you as a driver, and may pay out for damage to your own car.

Life insurance

Life insurance is protection for you and your family. If the main breadwinner of your family were to get seriously ill or die, this would have a huge financial impact. Life insurance can help give your family peace of mind that if something terrible does occur, they’ll be provided for.

There are 3 main types of life insurance policies:

• Life cover – this will provide a lump sum to your dependents if you die

• Critical illness – this can provide you with a lump sum payment if you can’t work for medical reasons, such as a heart attack, cancer or a stroke

• Income protection – this will provide a regular payment if you can’t work while you’re ill or disabled

If you don’t have any dependents, you may decide you don’t need life insurance. However, if you have a partner or family who depends on your income, to cover a mortgage, for example, it’s worth looking into.

Another factor to consider is price. If you’re young and healthy, life insurance offers good value for money, giving you high cover at a relatively low cost. If you take it out later in life, it may cost you more.

Travel insurance

When planning a holiday, the last thing you want to think about is something going wrong. 

Having travel insurance can protect you if it does.

Travel insurance can cover you for a wide range of events, so it’s worth considering when you book your next trip. And there’s a benefit to buying as soon as you book because it can cover you for cancellation or illness before you’re due to travel.

If you travel twice or more in a year, an annual policy can often be cheaper. Whether you buy single-trip or multi-trip travel insurance, it could potentially stop an unlucky event from becoming very costly.

Health insurance

Some employers offer health insurance as part of their benefits package. 

If you’d prefer to also have a private health policy, it’s important to look into exactly what you will and won’t be covered for. 

You should also check the exclusions to make sure you’ve got the cover you need. 

For example, some health insurance may not cover people with pre-existing medical conditions.