Insurance basics
What the words mean, which cover is a legal requirement, and what you're protected by if an insurer fails. Information only – not advice.
The key words
| Word | What it means |
|---|---|
| Premium | What you pay for cover, monthly or yearly. |
| Claim | Asking the insurer to pay out for a loss the policy covers. |
| Excess | A fixed amount you pay yourself when you claim. The insurer sets a compulsory excess; you can often add a voluntary excess to lower the premium, but you'll get less back when you claim. |
| Exclusions | What a policy doesn't cover. They vary between insurers, so read the small print. |
Give your insurer accurate, up-to-date information. MoneyHelper warns that getting details wrong, or not telling the insurer about changes, might mean the policy isn't valid and claims aren't paid. If you're struggling to pay a premium, contact your insurer rather than simply cancelling: MoneyHelper says insurers must support customers in financial difficulty.
Sources (checked 17 October 2026): MoneyHelper – Car insurance: what you need to know (opens in new tab); MoneyHelper – What is life insurance? (opens in new tab).
Motor insurance
- It's a legal requirement. You must have motor insurance to drive on UK roads, and third party is the legal minimum. It covers injury or damage you cause to other people, vehicles, animals or property – but not repairs to your own vehicle.
- Three levels of cover: third party; third party, fire and theft (also covers your car if it's stolen or damaged by fire); and fully comprehensive (also pays for accidental damage to your own car). MoneyHelper notes that third party isn't necessarily the cheapest – compare prices.
- No-claims bonus. A discount for each year without a claim. MoneyHelper says claiming usually costs you two years' worth, so it's worth weighing up whether a claim is worthwhile after your excess.
- Insurance applies to the vehicle, not just driving. MoneyHelper says you generally need at least third party cover for a roadworthy vehicle even if you don't drive it, unless it's officially registered off the road (SORN).
Sources (checked 17 October 2026): GOV.UK – Vehicle insurance (opens in new tab); MoneyHelper – Car insurance: what you need to know (opens in new tab).
Contents insurance (including if you rent)
Contents insurance covers your own belongings – furniture, electricals, clothes, jewellery – against loss, theft and damage. MoneyHelper says you don't need buildings insurance if you rent (your landlord is responsible for the structure), but your landlord won't usually cover your belongings, so contents insurance is sensible depending on your circumstances. It's optional. In a house or flat share you usually need your own policy (insurers often require a lock on your bedroom door) or a joint policy for the whole property.
Sources (checked 17 October 2026): MoneyHelper – Do I need insurance when renting? (opens in new tab).
Travel insurance
- GOV.UK says you should take out appropriate travel insurance before you go, covering existing health conditions and the activities you'll do. Without it you could be liable for emergency treatment costing thousands of pounds – GOV.UK gives examples such as £25,000+ for a broken leg needing hospital treatment in Spain.
- A GHIC is not travel insurance. The UK Global Health Insurance Card gives access to state-provided, medically necessary healthcare in the EU, Switzerland and some other countries on the same terms as residents. It doesn't cover private healthcare, repatriation or extras such as mountain rescue.
- Check what's covered: the full length of your trip, emergency transport, pre-existing conditions, your activities and every country you pass through. Standard policies usually don't cover airline or travel-agent failure – ATOL-protected holidays or a policy with failure cover can.
Sources (checked 17 October 2026): GOV.UK – Foreign travel insurance (opens in new tab); NHS – Apply for a UK Global Health Insurance Card (GHIC) (opens in new tab).
Life insurance and income protection
Life insurance
Pays a lump sum or regular payments if you die, to support dependants such as children or a partner. MoneyHelper says it can suit you if you have dependants, a partner who relies on your income, or want loved ones to be able to cover funeral costs; you might not need it if you're single or your partner earns enough. Check whether your employer offers death in service cover.
Income protection
Pays regular income (typically 50% to 65% of your income, says MoneyHelper) if illness or an accident stops you working, until you return, retire or the policy ends. There's usually a waiting period before payments start. It's different from critical illness cover, which pays one lump sum.
For both, MoneyHelper says you can change your mind within 30 days of buying and get a full refund, and you must answer medical questions honestly.
Sources (checked 17 October 2026): MoneyHelper – What is life insurance? (opens in new tab); MoneyHelper – What is income protection insurance? (opens in new tab).
If your insurer fails: FSCS protection
If a PRA-regulated insurer fails, the FSCS may protect eligible claims. It pays 100% of claims for compulsory insurance such as third-party motor, and for categories such as employers' liability, term life, income protection and annuities; it pays 90% for others, including first-party motor, home, travel, pet and health insurance. Some types, such as goods in transit, marine and aviation, aren't eligible. Cover is subject to conditions and limits.
Sources (checked 17 October 2026): FSCS – Insurance protection and compensation (opens in new tab).
If you're unhappy with how an insurer handled a claim, complain to it first, then you may be able to go to the Financial Ombudsman Service (opens in new tab).
See also: Budgeting and emergency funds · Jargon buster.