facebook logogoogle logo
5.0 Rating | 141 - reviews
facebook logogoogle logo
5.0 Rating | 141 - reviews
facebook logogoogle logo
5.0 Rating | 141 - reviews

Why is insurance a good financial decision? 4 reasons

Need assistance? Leave your details, and we'll get back to you shortly. Request a callback now.

Table of contents
(click to expand)

When buying insurance, you want first and foremost to provide mental comfort and protect yourself from potential expenses that your household budget could not cope with. Does this mean that the policy will not be financially viable? Not necessarily. From this article you will find out, among other things:

  • What are the estimated prices of insurance policies
  • When it is worth considering insurance
  • What your policy will protect you against
  • Why insurance usually pays off
Why is insurance a good financial decision? Extend Finance

What types of insurances are there?

There are a myriad of financial products available in the UK market. In addition to mortgages, Extend Finance assists clients in selecting suitable insurance policies. Our range includes:

Although it is difficult to expect any individual to buy all of these policies, some products are definitely worth considering.

Most policies are optional. It is only up to you whether you decide to buy life insurance or insurance for your child. However, remember that your decisions also affect other people, such as your family. Will the average salary in the UK allow you to pay for cancer treatment? Unfortunately, not always…

Who helps with choosing an insurance?

Due to the complex nature of the insurance market, many UK residents choose to enlist the help of a broker. Using an industry specialist is not only convenient, but also financially viable. As a whole-of-market broker, Extend Finance has access to offers from most insurance companies that operate in the UK. This makes your choice an informed one and you will consider many more options than if you were looking for a policy on your own.

An additional advantage of working with a broker is that you can perform a regular review of your products, i.e. checking them for coverage, cost-effectiveness and terms and conditions. The insurance market is changing practically all the time, so it is worth regularly reviewing whether the policies you have chosen are beneficial to you.

When is it worth taking out insurance?

Finally, let’s consider when it is worth considering insurance. To do this, answer a few (not necessarily simple) questions for yourself:

  • Do you have the savings to cover the expenses that a policy would cover?
  • Can you afford to pay your premiums each month?
  • How many pounds a year can you afford to spend to ensure your financial security?
  • Do you regularly pay your debts, for example loan instalments and mortgage?
  • What would you like to protect yourself against?

If you do not have savings with which you are able to live for months without a job, income insurance is definitely advisable. Do you remember the time when the COVID-19 pandemic started and the world literally froze? A good policy would certainly have brought you peace of mind then. On the other hand, having insurance comes with an obligation to pay premiums. While these don’t have to be high, it is a monthly or annual commitment that you have to find the money for if you undertake it. If you are struggling to pay your existing instalments or premiums regularly, you should go for help, for example to a financial adviser.

It’s also worth working out how much money you can afford to spend on cover. There is bound to be a policy that covers virtually any unpleasant event, but do you need it? It is worth approaching this topic sensibly and choosing the golden mean.

What does your policy protect you against?

Let’s take a look at the coverage of the most important policies. If you want to find out more about them, be sure to check out our blog and the tabs on the website dedicated to them.

Income protection

Income protection policy could save you from financial problems in the event that you lose the ability to earn a living due to illness or injury. Your insurer will pay you a benefit for a set period of time, usually between 50-70% of your gross monthly income. In the vast majority, such protection policies pays out until you can start working again – or until you retire, die or reach the end of the policy term – whichever is sooner. A basic policy option for someone aged 32 involves an outlay of less than £40 per month, but premiums increase markedly with age.

why insurance pays off? Extend Finance
Income protection insurance will pay you a regular income if you can’t work because of illness or injury.

You can read more about this in our article entitled Why do I need income protection?

Home insurance policy

A policy protecting your property is usually required by the lender who finances your home. This product can protect both the building itself (buildings) and its contents. Depending on the insurance option, the structure (roof, walls, but also windows or floors) or individual items, including electronic equipment, will be protected. According to statistics, an annual mixed policy (contents and buildings) costs, statistically, around £300, a variant covering only the building costs, on average, £228, while the contents will be protected for around £116. It is also worth mentioning that, in 2022, the average price to renew a combined buildings and contents home insurance policy fell by 10%.

You can read more about property policies in the Home Insurance section.

Life cover

A life cover policy does not protect you, but your family. The mechanism of its operation is quite simple, as the indemnity payment is made after your death, provided it occurs within a certain period of time. Depending on the option you choose, the cover lasts for the period agreed in the contract, for example 20 years, until you reach a certain age or for the rest of your life. Premiums depend on a number of factors, but according to statistics, an whole-of-life insurance’s premium for a 30-year-old will be on average around £40, but someone in their 50s will have to pay over £100 (depending on your individual circumstances and type of cover chosen). In return, the average insurance payout exceeds £79,000.

You can read more about the life cover policy on the government’s Moneyhelper website and in our article.

Critical illness cover

By choosing to purchase critical illness cover, you are providing yourself with significant financial support in the event of a serious medical event. For example, if you become ill with Parkinson’s disease or a really dangerous cancer, the insurer will pay you a set amount of money at a time, allowing you to cover medical costs, travel to specialists and even mortgage repayments. In 2020, the average indemnity paid out was £67,011 while, buying a policy worth £100,000, the average 30-year-old will have to pay premiums of around £25 a month. If a 50-year-old wanted to buy the same insurance, the premiums would exceed £100. The cost of critical illness cover is very dependent on the health of the person covered.

You can find out more about Critical Illness cover in our article, and if you’re a parent, be sure to check out the post Insurance for your child in the UK.

The other products we offer are basically derivatives of the insurances we wrote about above. You can find information about these policies on our website.

Why can insurance pay for itself?

It’s high time to consider why insurance can be financially worthwhile.

Premiums are less noticeable than you think

If you’re young, you probably don’t have a lot of savings. It’s in these situations that income or critical illness cover will prove particularly useful. Insurance premiums are often really low (especially for young people in good health), and the peace of mind that a good policy will give you is invaluable. By making a relatively small financial effort, you will significantly increase your security.

Whole life cover can be a form of financial protection for your children

Every one of us will die one day. As upsetting as it is, death is simply unavoidable and it is worth preparing for it in advance. If you choose a whole-of-life policy rather than a term policy, at the expense of slightly higher premiums, you can be sure that your family will receive adequate financial support that they can use for any purpose. It is up to your loved ones to decide whether they will use the proceeds to pay off your debts, move house or further their education.

The sum insured significantly exceeds the savings of most UK residents

According to statistics, the average UK resident has around £7,500 in a savings account. In practice, this amount of cash allows you to survive for a maximum of a few months without work. However, this is significantly less than the average amount that insurers pay out for critical illness or life cover. Of course, there is a chance that you will never have to use the product you have taken out, but exactly the same can be said for savings.

The amount you can receive is incomparable in relation to premiums

As we’ve already mentioned, the annual cost of home insurance is around £300. Obviously, this is not a small amount, but just think of the expenses you will have to incur after a theft, storms or fire. You may never need to use your policy, but what if you happen to be unlucky? Once again, we come to the conclusion that insurance gives you peace of mind and significantly reduces your day-to-day risks.

Summary

Many of our clients ask whether insurance is worthwhile or worth buying. There is no definitive answer to this, as everyone’s situation is somewhat unique. However, as industry experts, we can in good conscience admit that everyone should at least consider buying a policy. Many products are offered at very affordable prices, and this means that buying one doesn’t have to be difficult.

Planning to buy insurance or change your current policy? You are more than welcome to get in touch with our team. The advisors at Extend Finance will not only help you choose the right insurance, but also answer any questions that arise. Don’t wait. Take care of your finances today!

Share

Table of contents
(click to expand)

Get In Touch

By submitting the form, you consent to the collection and processing of your personal data in accordance with our privacy policy.
5.0 Rating | 141 - reviews
facebook logogoogle logo

Our team is here to assist you. Contact us by completing the form below.

Think carefully about securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it.

Your Home (or property) may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it. Conveyancing services and some forms of Buy to Let mortgages are not regulated by the Financial Conduct Authority.

Your Home (or property) may be repossessed if you do not keep up repayments on your mortgage or any other debts
secured on it.

Your Home (or property) may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it. Conveyancing services are not regulated by the Financial Conduct Authority.

Extend Finance nor The Right Mortgage Limited can’t provide advice regarding Personal Pensions, Pension planning or investment planning advice. You must seek independent financial advice from a suitably qualified professional financial adviser who may charge you for advice.

Wills, Will writing, Trusts and Trust planning are not regulated by the Financial Conduct Authority.

* We will receive a small fee from CheckMyFile for any referrals.

Get In Touch

By submitting the form, you consent to the collection and processing of your personal data in accordance with our privacy policy.
5.0 Rating | 141 - reviews
facebook logogoogle logo

Skontaktuj się

Wysyłając formularz wyrażasz zgodę na gromadzenie i przetwarzanie Twoich danych osobowych zgodnie z naszą polityką prywatności.
5.0 Rating | 141 - reviews
facebook logogoogle logo

Done!

One of our advisors will contact you ASAP!

Zrobione!

Jeden z naszych doradców wkrótce się z Tobą skontaktuje!