Have you ever figured out how much insurance costs you? We think you'll be surprised when you add up all of your premiums. You'll be even more surprised when you find out that you may have duplicated some of the cover you're paying for. If you stop doing things twice, you'll save money.
A lot of people don't know that they have insurance that covers legal costs, loss of income, theft, and even death, but they do. This can happen because many of us don't fully understand what our policies cover, especially if financial advisers and brokers set them up for us.
In a recent survey, the Financial Services Authority (FSA) found that optional extras like breakdown recovery and legal expense cover were often added to car insurance without checking to see if the policyholder was already covered. People with Permanent Medical Insurance may also have taken out payment protection policies to cover their monthly payments on mortgages, loans, and credit cards. This is not unusual. The point is that if they make a claim on their Permanent Medical Insurance, their payout will be less because part of their claim is also covered by their payment protection policies. This means that their payment protection policies are a waste of money.
This has been confirmed by the Financial Ombudsman, who said, "People often call us when they have too much insurance. They often don't find out until they make a claim that they've been paying for a policy that doesn't do much, if anything, for them ".
There's also a lot of proof that some of us don't really know what our insurance covers. Take Amanda Lariviere from West Yorkshire as an example. Amanda, a 42-year-old mother of two, is recovering from ovarian cancer. She had an allergic reaction to chemotherapy that kept her from working. She got an unpleasant tax bill out of the blue, so she went to her building society to see if she could get some cash by re-mortgaging. The advisor at the Society asked her to bring her life insurance policies with her so that they could be used to back up her application to re-mortgage. So you can imagine how surprised and happy Amanda was when the adviser told her that the policies she had with Norwich Union and Scottish Provident, which cost her GBP80 per month, were not life insurance at all, but rather critical illness policies with a total insured value of GBP100,000. She was able to make a claim on these policies, and the GBP100,000 she got was enough to cover most of her mortgage and taxes.
Here are some common insurance plans to look at.
Critical Illness Insurance
Critical illness insurance is usually sold as an add-on to a life insurance plan. Most of the time, that's the cheapest way to buy it. Some smart employers, on the other hand, already offer critical illness insurance as part of their benefits package. Find out if you are one of the lucky ones by asking your boss.
Life Insurance
Some employers offer life insurance as part of their pension plans as well. It's called "death-in-service benefit," and if an employee dies while working for the company, the company usually gives them a lump sum worth 3 to 4 times their annual salary that isn't taxed.
Permanent health insurance and insurance for payments
Some people also call Permanent Medical Insurance (PMI) "Income Protection Insurance." PMI pays out the insured amount each month if the policyholder is sick and can't work because of one of a long list of specified illnesses. Some policies will even pay out if the policyholder loses their job. PMI policies pay out for as long as the policy is in force or at least until the end of the insured term.
Few people realise that PMI actually gets rid of the need for Payment Protection insurance. This is the kind of insurance that is often sold with loans, credit cards, and mortgages to keep monthly payments going if you get sick, hurt, or lose your job. In fact, you can't make a claim on more than one policy for the same thing; only one policy will agree to pay out! (All the others will give you less money because you are getting money from your other policies.)
Mobile Phone Insurance Most mobile phone policies have a high deductible, which is almost never less than GBP50. You might be better off saving the money for insurance and switching to a plan where you pay as you go.
Legal Expense Insurance
Most home and contents insurance policies cover legal costs related to disputes about your home. This insurance is usually free. Most car insurance policies offer legal expense coverage as an extra that you can choose or, in some cases, as a standard feature. Some trade unions and professional organisations offer their members access to legal advice as a service. Before you pay for more insurance, check these out.
Identity theft insurance "Which," a consumer magazine, says that if your identity is stolen, you are only responsible for the first GBP50. Is it worth getting insurance for a risk of GBP50? My bank just gave me this insurance for free, by the way.
Credit card purchases are automatically covered After you shop, many credit cards will automatically cover your purchases for a certain amount of time. A good example is the Barclaycard. If you used your Barclaycard to buy something between GBP50 and GBP2,000, you are covered for the next 60 days against theft and accidental damage.
