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What are the different types of insurance?

Insurance protects you and your belongings from the financial cost of something going wrong.

It can’t stop bad things from happening. Clearly. But if something unexpected does happen – such as a burglary, a car accident or an illness while you’re on holiday – it means you won’t have to pay the full financial cost on your own.

Insurance is all about managing risk. There are some instances where insurance is compulsory. For others, it will depend on your circumstances, how you feel about risk and how much risk you’re prepared to take.

Here’s an introduction to the most common types of insurance to help you work out which ones you might need.

Bear in mind that some bank accounts offer insurance, for example travel, breakdown or mobile phone cover, as part of their package of benefits. So before taking out a new policy, it’s worth checking to make sure you’re not already covered elsewhere.

Types of insurance

Home insurance

If you own a home, you’ll likely need to have buildings insurance as a condition of your mortgage. This won’t cover you for general wear and tear. But it will cover the cost of repairing or rebuilding your home if it’s damaged by storm, floods, fire, lightning or subsidence.

Both homeowners and renters can take out contents insurance. Though not a legal requirement, it covers your possessions in case they’re damaged, stolen or lost. For example, if there was a fire, flood or burglary at your home, it would cover the cost of replacing your belongings. If you’re taking out buildings and contents insurance, many insurers offer discounts if you combine your policies. So this could help you get a cheaper deal. You can find out more about the options offered by HSBC Home Insurance.

Car insurance

For many of us, car insurance is the first type of policy we buy. That’s because when you drive you’re legally required to have motor insurance – at a minimum, third-party only cover.

Third-party cover applies to any damage to another person’s car or property. But it won’t cover damage to your car. If you rarely use your car, or you don’t think it’s worth much, then you may decide this is enough.

However, if your car is worth a decent amount, paying for extra levels of cover could make sense. HSBC doesn’t offer car insurance right now but here's a useful guide by MoneyHelper (formerly the Money Advice Service) to choosing the right level of car insurance cover.

Life insurance

Life insurance is protection for you and your family. If the main breadwinner of your family were to get seriously ill or die, this would have a huge financial impact. Life insurance can help give your family peace of mind that if something terrible does occur, they’ll be provided for.

There are 3 main types of life insurance policies:

  • life cover – this will provide a lump sum to your dependants if you die

  • critical illness – this can provide you with a lump sum payment if you can't work for medical reasons such as a heart attack, cancer or a stroke

  • income protection – this will provide a regular payment if you can't work while you’re ill or disabled

If you don’t have any dependants, you may decide you don't need life insurance. However, if you’ve a partner or family who depend on your income, to cover a mortgage, for example, it’s worth looking into.

Another factor to consider is price. If you’re young and healthy, life insurance offers good value for money – giving you high cover at a relatively low cost. If you take it out later in life, it may cost you more yet you may have more need for it as you’ll be more likely to have health issues. You can learn more about the cover offered by HSBC Life Insurance.

Travel insurance

Many of us have lost luggage. If you’re unlucky, you may have even endured a nightmare trip to a hospital while outside the UK. It may be unlikely, but the potential cost could be high.

Travel insurance can cover you for a wide range of events, so it’s worth considering when you book your next trip. And there’s a benefit to buying as soon as you book because it can cover you for cancellation or illness before you’re due to travel

If you travel twice or more in a year, an annual policy can often be cheaper. Whether you buy single trip or multi-trip travel insurance, it could potentially stop an unlucky event becoming very costly.

Since the start of the pandemic, most policies won’t cover cancellations caused by coronavirus. Some won’t even cover your medical costs if you get the virus while outside the UK, so be sure to check the exclusions carefully before buying. Find out more about taking out HSBC Travel Insurance.

Health insurance

Most people in the UK are covered by the National Health Service (NHS). But if you’d prefer private treatment or don’t want to wait to be treated through the NHS, you can choose to get private medical insurance.

Before taking out a private health policy, it’s important to look into exactly what you will and won’t be covered for. You should also check the exclusions to make sure you’ve got the cover you need. For example, some health insurance may not cover people with pre-existing medical conditions.

Some employers offer health insurance as part of their benefits package. We don’t offer this type of policy but MoneyHelper can help you decide if you need private medical insurance.

Multi-cover insurance

Combining different types of cover into 1 policy can be a good way to save money – plus it means you’ve fewer payments and documents to keep track of.

You may be familiar with multi-car insurance policies. HSBC Select and Cover combines multiple types of cover in 1 policy. It lets you pick and choose 3 or more of these 7 different types of cover:

  • Mobile Phone Insurance

  • Gadget Insurance

  • Worldwide Travel Insurance

  • Motor Breakdown Insurance

  • Home Emergency Insurance

  • Starter Life Insurance

  • Excess Protection Insurance

It covers your partner and any children living with you who are under 18 – or under 23 if they’re in full-time education and living at home during the holidays. So, if you’ve a large family with lots of phones and gadgets, it could make a lot of sense.

Select and Cover is available to existing HSBC customers who are registered for online banking.

Pet insurance

Pet insurance is optional, like travel insurance. If something happens to your beloved pet, it can help you to cover your costs and make sure they get the care they need. 

If your pet is relatively young and healthy, you might not think pet insurance is worth it. You could instead choose to put money into a savings account to cover any possible costs. Bear in mind that the average cost of a claim is more than £800.1

If you take this approach, you’ll need to consider:

  • how much you can realistically put aside

  • if you can be disciplined and not dip into that pot of money for anything else

  • what you’ll do if you need to pay a vet’s bill before you’ve saved up enough to cover it

Also, bear in mind that if you take out a policy later in your pet’s life after they've started showing signs of an injury or illness, you won’t be able to claim for that condition.

We don’t offer pet insurance at HSBC but M&S Bank, a member of the HSBC Grouop, does.

 

Source: Association of British Insurers, April 2021