Introduction to insurance
There are different types of insurance and you will probably be aware of some of them. These include car insurance, life insurance and home insurance.
Insurance protects us against a possible unwanted outcome. It protects us against the possibility of an insured loss, usually financial. An example would be, if there was a fire at your property and you have contents cover and your sofa has been damaged by the fire, the insurer would look to put you back into the same position prior to the incident taking place. This could mean providing you with a new sofa or providing a cash settlement. Most home insurance policies are new for old. In our example, if the sofa was ten years old, the claim settlement would be based on a similar quality sofa based on how much it would cost your insurer to replace it now, less any relevant policy excess.
When we buy insurance, we transfer our risk to someone else in exchange for a payment or premium. If we suffer an insured loss, insurance may cover the agreed amount. To be able to insure an item you must have an insurable interest in the item. For example, if you own a car and are noted on the V5 document then you have an insurable interest.
There are different ways to obtain insurance quotes and take out a policy. Intermediaries usually referred to as brokers can search a panel of insurers to obtain quotes based on your requirements. You can contact insurance companies by phone and some companies have the facility to obtain a quote on their website. You can also visit comparison websites where you enter the details for the property for which you require a quote. Once the form is complete the comparison site will then send the information to the insurers and the results will be displayed.
Insurance can sometimes be quite complicated to understand. If you received your policy booklet and schedule in the post they may be tucked away in a drawer or if you received your policy documents by email you may have put them in a folder. Sometimes, your documents may be stored in your online account on your insurer's website.
Home insurance provides cover for your building(s) and/or your contents. If you own your home, either outright or with a mortgage, you can purchase buildings cover. If you have a mortgage, the mortgage company may require you to purchase building insurance.
As the name suggests, contents insurance provides cover for your contents. These include items such as a sofa, table and chairs, etc.
If you look at the policy wording for home insurance you will probably find the booklet or document has lots of pages and most people don't read it. The policy wording may not look user friendly and may not seem easy to understand and you may not have the time to read it.