Insurance
Everyone will be expected to know:
- What insurance is and how it works
- Different forms of insurance and who they might be for
IMPORTANT FACTS- What is insurance?
- Insurance was once described as the only product that both the buyer and the seller hope is never actually used.
- It is often also described as protection and is a means by which customers can reduce or remove a risk that they are unwilling or unable to bear.
- Insurance is available for a large number of risks or indeed every day events.
- As that risk is passing to another party, usually an insurance company, they are charged a fee, called a premium.
- In the event that an unfortunate event happens, the customer submits a claim and receives a payment to compensate them for their loss.
- There is usually an amount called an excess that the customer needs to pay which ensures that the policy is only used for meaningful claims.
- It would be inappropriate and indeed too expensive if a student were to claim for a lost pen but a laptop would be a different issue.
- It is a complicated area and one where it is essential to consider all of the costs and to make sure that you understand the contract that you are entering into.
- Essentially the contract is a “promise to pay” between the consumer and the insurance company and it is crucial that the consumer understands the promise and what if any (and there are usually many) conditions are associated with it.
VIDEO- Two helpful videos on two of the major types of insurance that young people will be likely to get in the future.
(Note: this table can only be viewed on a computer)
REAL LIFE EXAMPLE- There was a scandal regarding loan providers who "mis-sold" PPI insurance - i.e. sold it to people who didn't understand what they were buying. See Money Saving Expert's campaign on PPI mis-selling and advice on how to reclaim payments for insurance you didn't need.
IMPORTANT FACTS- How do you buy insurance?
Insurance can be bought in a variety of ways:
- Direct from an insurance company – over the phone or via the internet
- From a comparison website such as:
- Through insurance brokers (for general insurance products, such as car, home or travel insurance) or independent financial advisers (for life insurance, investments and pensions), who can offer advice about which products best suit your needs and circumstances
- From a high street retailer such as a supermarket or a bank
- Alongside another product, for example getting travel insurance from a travel agent, or mobile phone insurance from your mobile operator
The best advice is to shop around!
Insurance premiums can vary hugely so the more quotes you get the better. Price comparison sites are great but not all insurers list their products on them. For instance Direct Line does not appear on such sites. It is also important to shop around when you renew a policy; some insurers place a heavy emphasis on “acquiring” customers and then seek to increase their prices.
Assess whether insurance is needed- do the sums.
For example, if you take out a 2 year contract on an iphone and lose it after the first year you will have incurred a charge of £12.99 x 12 = £155.88 plus the £50 excess so a total cost of over £200 but still less than the £500 + cost of the phone but it is still a lot of money to add to your monthly costs.
False insurance claim
It is illegal to falsely claim on your insurance. It is also important to tell the truth when you apply for insurance (such as declaring past motor accidents or speeding convictions) as failure to do so may lead to the insurer refusing to honour the claim.
REAL LIFE EXAMPLE - Two recent high profile cases:
John Darwin ("Canoe Man") - he faked his own death, turning up in December 2007, five years after he was thought to have died in a canoeing accident. This meant his wife was able to claim money on his life insurance policy. Both John Darwin and his wife Anne were sentenced to over six years in prison.
Rebecca Turner & Shanti Andrews - falsely told police in Brazil that a camera and other possessions worth £1,000 had been stolen from them. Police then found these items in their hotel rooms so they were arrested. They spent time in a prison in Rio de Janerio before being tried and sentenced to community service in Brazil.