If you are anything like me – you’d like to class yourself as a sensible person when it comes to money.  So much so that if you could you’d take out insurance for almost everything.  Almost like a comfort blanket! But which ones are really worth it and which ones aren’t?  I’ve done some investigations, but before I go any further, I’m not telling anyone to stop taking out insurance for stuff, you can keep your comfort blankets! I just want you to fully understand what it is you are paying.  I cover some of them below; let’s have a look shall we;

Payment Protection

If you take out a mortgage or a credit card (any loan really) you will be offered something called ‘payment protection’.  Which according to the label on the tin, is that, if for whatever reason (illness, no job) you can’t repay your debt, the insurance will do it for you – nice!  That seems like a really sensible thing to do.  I always do it.  But you may not be able to get a payout if you have a part-time job, are self employed or if you can’t get work because of a pre-existing health condition or if you were working on a short term contract. Supposedly, only 4% of people who take out ‘payment protection’ ever claim on it!  Those insurance fat cats are good, aren’t they!  Some of these banks are clever too, because instead of asking for monthly premium payments, they just add the lump sum to the value of your loan so you end up paying interest on the whole lot over the length of the loan!  So in my simple mind, not only are you paying insurance for something that may not happen, we are also paying interest on it too. Hmmm…

Extended Warranties

I like this one.  Every time I buy some new electrical thing, at the till I get asked if I want extended warranty.  Firstly, I don’t expect the blooming thing to break in the near future.  Secondly, I’m a bit worried that, as the person selling me the goods, you don’t have enough confidence in it either.  Thirdly, I’ve spent enough money on this item, so of course I want to give you an extra £150 or whatever it might be!

I personally don’t think we need it.  Most goods come with a 1 year guarantee and we are protected under the Sale of Goods Act 1979 (quote that in your next compliant letter!) which means that goods must be ‘fit for purpose’ when you purchase it.  Most new goods/appliances don’t break down.  Which magazine stated that 81% of washing machines don’t breakdown in the first 6 years after you buy them.

Let’s say for arguments sake, that you do pay for a 5 year warranty at £150 and the item cost £50.  The electrical appliance would have to break down four times in year 2 to 5 (remember year 1 is covered) to be worth it.  Hmmm…make sure you work out whether or not it is worth it (i.e. how many times it needs to breakdown) before you take out extra cover.

Mobile Phone Insurance

So as far as I know, the lowest insurance premium is around £5 a month even though a new handset could cost as little as £20.  So on that basis; your phone would have to be stolen around every four months to make the insurance worth it.

Let’s look at the main aspects of the insurance for a second.  It’s supposed to cover you for calls made when the phone has been stolen, but it won’t cover you if the phone disappears because you left it unattended.  Plus it will only pay out if the loss of the phone is reported within 24hrs.

So if your phone was stolen and you noticed within the 24hrs you’d report it straightaway so there would be no calls costs involved to protect you from.  If you didn’t notice, you might not notice for another 24hrs!  Plus you need to get a police report etc!!  Phone your mobile phone company and find out what your insurance covers you for to be sure.

Wedding Insurance

Pile of poo – sorry to be so blatant!  I’ve been married and thankfully nothing went wrong.  But seriously – wedding insurance!?  Someone help me out here.

Ok – let’s say your photographer doesn’t show up – how will getting a cheque for £200 help you to remember your special day? Or let’s say your guests get food poisoning, are you going to claim on insurance and then get them all back to eat it again?  Perhaps some people would. 

You may as well take that money you would have spent on wedding insurance and put it towards a weekend away on your first anniversary or something.

Travel Insurance

You really don’t want to be caught out in another country.  Travel insurance is a good thing to have, but check the policy carefully.  You may not need to have a standard policy, it’s not always one size fits all.  Try www.insureandgo.com , they allow you to put together your own policy.  If you travel more than once in a year, consider getting multiple trip policies.  Also, check that you don’t already have free travel insurance with your bank.  Some accounts come with free travel insurance as perks.

The following insurances you should have in my humble opinion;

• Home and Contents insurance – they don’t have to be with the same company but could work out cheaper if they are.
• Car insurance – you can’t drive without it.  Shop around for the best deals

You can pretty much insure yourself for anything.  I think Jennifer Lopez’s butt is insured.

What ever you are taking insurance out for, please remember the following;

• Always compare insurance prices – leave yourself enough time to do this so that you aren’t rushing and choose one because you ran out of time.
• Be flexible – try to find insurances that give you flexibility so that you don’t have to go with the standard package if you only need the basic cover
• You should really only be buying insurance for the things that you cannot replace, pay for or will suffer real pain by losing.  Anything else you should save for and cover yourself instead of paying large premiums.

You can get lots of information on insurance as well as other financial stuff (ISA’s etc) from www.moneysavingexpert.com .

I hope this has been useful to someone out there!

Speak soon!

D