Your Guide to the Different Types of Insurance

Protecting your family should always be your first priority, and try as you might, you can’t wrap them in bubble wrap and avoid everything happening to your family. But at least you can ease the aftermath with a decent insurance policy.

But gaining a decent insurance policy starts with understanding the insurance policies you’re looking at, which can be a daunting task filled with confusing terms and incomprehensible words you won’t hear outside the industry.

If you’re looking for an insurance policy, take a look at our guide to the most common types of insurance, written in plain English, with the industry terms kept to a minimal.


Home insurance

Homeowners insurance typically covers three main aspects: damage to your home’s interior or exterior, personal liability for damage or injuries and rental for a hotel if you have to leave your home to be repaired.

There are a number of common afflictions to the interior or exterior of your home that are covered by your home insurance policy. These include lightning, hurricanes, fire, and vandalism. It is likely that your insurer will compensate you to cover the cost of the home repairs, or in some cases, the rebuilding of you home. There are some things that aren’t covered however, like flooding, earthquakes, and poor home maintenance, which will all need a separate policy to cover. Any freestanding garages, sheds or other structures on the property will also need a separate policy.

If items in your home are lost by an event covered in your policy, you will be covered for it. These items include clothing, furniture, appliances, and most other contents. However, there might be a limit on how much you can be reimbursed. Usually, 50-70 per cent of the amount of the house’s insurance is covered.

If you are unlucky enough to suffer one of the covered afflictions, it’s possible the repairs or rebuilding of your home will be substantial enough to force you out of your home. Your policy will cover any rent or hotel bills should you need to find other accommodation. You will also be offered a daily allowance for meals. However, these come with strict limits so that policy owners don’t end up at The Ritz eating in 5-star restaurants. 

You can compare home insurance polices on various comparison websites online.


Health insurance

Health insurance is designed to ensure that your health care needs are met. It protects you from paying the full costs that come with medical services if you are injured or sick.

Although the British NHS allows for free health care, the waiting lists and quality of care can often lead patients to seeking out alternative forms of healthcare. Private healthcare has a reputation for offering less waiting time and a better environment for care, but it will cost. Private health insurance can cover the costs of private healthcare from diagnosis to treatment.

You can choose between a comprehensive cover or a treatment and care policy. Comprehensive cover offers the highest level of health insurance cover. Private diagnosis, treatment and aftercare are all covered under this policy and your price is determined by factors such as age, lifestyle choices and medical history. It unfortunately doesn’t cover chronic conditions, pre-existing conditions, allergies or food intolerances, or natural aging.

Treatment and care health insurance has all the same policies of determining price based on various factors, covers the cost of a private treatment with a diagnosis supplied by the NHS.

You can look for health insurance quotes here.


Auto insurance

Auto insurance can cover the payment for all, or part of, the costs of an accident, theft, or damage made to your vehicle. How much is covered will depend on which policy you go with.

The most basic package, third party insurance, is mandatory in order for you to be allowed drive. This will cover the costs put to you by a claim by a third party, i.e., another driver or their insurer, for injuries, damage to their property or a third-party property, should you crash into something other than another car. The next level up is third party, fire and theft, which add protection if your vehicle is broken into or set alight.

Comprehensive cover is the most popular type of car insurance in the UK, as it covers most eventualities, including injuries or damage to other people or property, damage to your vehicle due to theft or fire, accidental damage, medical expenses, and damage or theft of a vehicle’s contents.

There are sometimes extra expenses covered in your insurance policy, like windscreen cover and legal expenses, but it is worth looking over the policy and shopping around if you are looking for these extra additions.

Take a look at comparison websites to shop around for policies and quotes.

Your Guide to the Different Types of Insurance


Life insurance

Life insurance is unique in that your insurer doesn’t determine how you’re the money you are paying is spent. After paying in throughout your life, your beneficiaries will receive a lump sum, or a series of regular payments when you die to spend however they wish. How much is available to them comes down to how much cover you buy and how long you have been paying for.

I can cover whatever your beneficiary deems fit. Funeral costs, college tuition, mortgage payments, etc. can all be covered by the money left to them.  Unlike other insurance policies like auto or home insurance, your beneficiaries are simply given a cash deposit.

Insurers will offer you two main options when shopping for life insurance: term life insurance and whole of life insurance. Term life insurance policies will only pay out if you die within your term. A level term policy will offer cover that will stay the same throughout your term and pay out a lump sum if you die within your agreed term. It is the most affordable option.

A decreasing policy is mainly designed to aid in repayment mortgages as the outstanding loan will decrease over time. The level of cover will reduce every year of your term. An increasing policy is the opposite and will see the level of cover rise over the policy term in order to keep up with inflation.

Whole life insurance has the benefit of accumulating cash value, which allows the policyholder to use it as a source of loans or emergency cash. As long as you have kept up with your payments, they will pay out no matter when you die. However, they tend to be more expensive than shorter-term policies and if you manage to live longer than you expected, there is a chance you have been paying in more than you will get out.

There are additional options to life insurance that will suit people looking for coverage in different stages of life. For example, a joint life insurance policy will cover both you and your partner. However, it will cost a higher premium amount. Even with this in mind, it usually works out to less than what two separate premiums would cost. Over 50’s life cover is also available, and they are guaranteed to pay out when you die, but they often have the problem of also resulting in more money going in than out.  



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