Insurance — what's worth paying for
Insurance is for risks you couldn't afford to absorb yourself. Some kinds are essential, some are useful, and some are pure profit margin for the insurer. This guide helps you sort which is which.
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The insurance you almost certainly need
Three policies are essential for most UK adults. If you only ever buy three insurance products in your life, these are the three.
- Car insurance
A legal requirement for any vehicle kept on a public road. Comprehensive is often cheaper than third-party-only — always quote both.
- Buildings insurance
Required by mortgage lenders. Covers the structure of the property against fire, flood and similar perils. Rebuild cost — not market value — is what you insure for.
- Life insurance — if anyone depends on your income
Term life is cheap, simple and the right product for almost everyone. Cover the years you'd need to replace your salary.
Useful but often skipped
These aren't required by law, but the consequences of going without them are big.
- Contents insurance
Replacing the contents of a flat from scratch is shockingly expensive. Even tenants need this.
- Income protection
Pays a monthly income if illness or injury stops you working. Usually more important than critical illness cover for working-age adults.
- Travel insurance
Buy when you book, not when you fly — cancellation cover starts immediately. Always check medical cover limits for your destination.
Insurance that's usually a waste
If you can comfortably absorb the cost of the item being replaced, paying someone else to insure it costs you on average. Extended warranties on consumer electronics, mobile-phone insurance bought in-store, and most appliance protection plans fall into this category.
How to get a fair price
Quote at least three comparison sites — none covers the whole market. Always quote your existing insurer direct, and never auto-renew without checking: the FCA banned 'price walking' in 2022, but renewal quotes still often beat the new-customer price only by a thin margin.
Quote 20–26 days before renewal: insurers typically price quotes as 'new business' at this point, and prices then rise as renewal nears. Cancel any extras you don't want (breakdown, hire car, key cover) and re-add them only if the bundle is cheaper than the standalone alternative.
Life insurance: term vs whole-of-life
Term life pays out only if you die within a fixed term (typically 20–30 years). It's cheap because most policies never pay out — but the right product if your goal is to replace lost income for a fixed period like dependent children or a mortgage.
Whole-of-life policies pay out whenever you die, so premiums are much higher. They're rarely useful for income replacement; their main use case is funding Inheritance Tax on a known liability. Write any life policy in trust (free, one form) so the payout falls outside your estate and reaches beneficiaries within days, not months.
Critical illness vs income protection
Both pay out if you can't work due to illness — but very differently.
- Critical illness
Pays a tax-free lump sum on diagnosis of one of a defined list of conditions (typically cancer, heart attack, stroke, MS). Useful for clearing a mortgage or one-off costs, but the conditions and severity definitions matter enormously — read the policy wording, not the brochure.
- Income protection
Pays a monthly income (usually 50–65% of pre-tax salary) if you're unable to work due to any illness or injury, after a deferred period (typically 1–6 months). Lower headline payout, but covers a far wider set of real-world reasons people stop working. Most financial advisers rate it more useful than critical illness cover.
Making a claim well
Report incidents quickly — most policies require notification within 24–48 hours, even if you don't want to claim. Take photos, keep receipts, and don't admit liability at the scene. For motor claims, exchange details but say only what's factual.
If the insurer rejects your claim or offers a low settlement: complain in writing, get the insurer's final response (it has 8 weeks), then escalate to the Financial Ombudsman within 6 months. The FOS is free, independent and decides claims up to £430,000 (April 2025 limit) — and it overturns roughly a third of insurer decisions referred to it.
Go deeper on insurance
Income protection vs critical illness cover — which one do you need?
Income protection and critical illness cover both pay out if illness or injury stops you working — but they work very differently. For most working-age earners, income protection is the higher-value protection.
Read the explainer →Buildings and contents insurance, and Flood Re
Buildings insurance covers the structure of your home (and is mandatory if you have a mortgage). Contents insurance covers what's inside. The Flood Re scheme, jointly funded by insurers and homeowners, makes flood cover available and affordable in around 5 million higher-risk homes through to at least 2039.
Read the explainer →Travel insurance: what to check before you buy
Travel insurance is regulated by the FCA and protects against the financial cost of medical emergencies, cancellation, lost baggage and personal liability while you are away. The cheapest single-trip policy can leave huge gaps — the questions below are the ones to check before clicking 'buy'.
Read the explainer →
Common questions
- Should I pay annually or monthly?
- Paying annually is almost always cheaper — monthly is a credit agreement and typically charges APR between 15% and 35%. Pay annually if you can.
- What is excess and how should I set it?
- The amount you pay yourself before the insurer contributes. Higher excess = lower premium. Set it at a level you could realistically pay tomorrow if you had to claim.
- Does no-claims discount transfer between insurers?
- Yes. Most UK car insurers honour each other's no-claims discount — keep your renewal letter as proof.
- What is dual pricing and is it still allowed?
- Dual pricing — charging existing customers more than new ones for the same policy — was banned by the FCA in January 2022 for home and motor insurance. Insurers must now offer renewal prices no higher than the equivalent new-customer price. It hasn't eliminated the case for shopping around, but the gap is smaller than it used to be.
- What does 'in trust' mean for life insurance?
- Writing a life policy in trust means the payout goes directly to your chosen beneficiaries rather than through your estate. Two benefits: it pays out within days rather than waiting for probate (often months), and it sits outside your estate for Inheritance Tax purposes. Every major UK life insurer provides the trust paperwork free — just ask.
- Are 'gadget' or mobile phone insurance policies worth it?
- Usually not. Premiums plus excesses often exceed the cost of replacing the device over its working life, and policies typically exclude loss outside the home, accidental damage in specific circumstances, or theft without a police reference number. Check whether your packaged bank account, home contents policy or travel insurance already covers the device first.
- Is breakdown cover worth it?
- If you depend on the car for work, or drive an older vehicle, basic Roadside + Recovery cover usually pays for itself in a single callout. Many packaged bank accounts include it free, and some manufacturer warranties bundle 1–3 years' breakdown cover with new cars — check before buying separately.