Insurance - what do you need and what can you live without?

Many of us are reviewing our personal finances and looking to save money any way we can. One of the first things that can seem dispensable is the long list of insurance policies many of us hold.

But which insurance is non-essential, and which should you hold onto? We look at which policies you can cut back on and which you'd be wise to keep.

Motor Insurance

If you drive a car, insuring your vehicle is a must. Not only because of the cost you would incur if you did have an accident or your car was stolen, but also because it is a legal requirement. It's illegal too to drive motorbikes or vans without adequate motor insurance.

The minimum cover for your motor required by the law is third-party insurance, so to really save money you might consider cutting down your comprehensive cover to this bare minimum. However, as this only offers a very basic level of cover, it might not be adequate for you and it is not always the cheapest option.

It's usually possible to save money on your car insurance policy by shopping around to find the most competitive deal.

Life Insurance

If you don't have any dependants or debts then life insurance may not be a necessary expense for you. But if members of your family are dependent on your income, life insurance is another must. Although we obviously would rather not think about it, it's crucial to make sure your dependants are covered should you no longer be around to support them.

You should be able to get a good deal that sees you paying a reasonable amount per month in exchange for the peace of mind of knowing your family will be protected. That said, it's still important to make sure that you aren't paying over the odds for cover you don't need.

It's possible that you won't have to buy life insurance if your life is already covered by other policies in place. For example, some employers offer 'death in service', which means that upon your death your dependants could receive a payout of up to 4 times your salary. Look into the terms and conditions of your employment to find out if there is already a scheme such as this in place. If there is and it provides adequate cover, you may not have to take out extra protection.

Another thing to consider is if you do cancel your life cover now, it's likely to cost you much more to take it out again later on in your life. This is simply because you will be older, and may perhaps, have more health issues, so premiums will start to cost more. As such, keeping up premiums for the policy you already have may be a wise idea.

Home Insurance

If you are a homeowner with a mortgage, home insurance will usually be a required component of your mortgage. But as well as being essential in this way, it's also arguably essential for your peace of mind.

Buildings as well as contents insurance will protect you financially against damage to your home, accidental or otherwise. As such it is something most of us would prefer not to live without simply because the cost of fixing or replacing something that goes wrong could pose an unexpected expense that you may not be prepared for.

In this way your home insurance policy should be seen as high-priority, and something you should continue to pay out for. Just as with any kind of insurance however it's still important to shop around to get the best deal you can as well as the cover that suits your circumstances.

Many home insurance policies will cover every member of the family, which means that even those away at university or elsewhere may have cover in place for their personal possessions - meaning there's no need for them to take out extra contents insurance while they are away.

If you rent your home you won't need to worry about buildings insurance, but contents insurance may be a good idea to give you the peace of mind that your possessions are protected. The cost of paying out premiums may be much less than the amount you'd have to pay to replace all of your things if you lost them in a fire or were burgled, for example.

Still, it is very important in every living situation to work out exactly how much cover you'll need, and what you need covered. In this way you can make sure that you take out the right policy to cover your necessities.

Travel Insurance

Travel insurance isn't a necessity in legal terms, but it is still certainly worthwhile nonetheless. This is because the costs involved if something goes wrong on your holiday or while you are travelling have the potential to be huge - much more than what you will spend in premiums to keep up a basic level of cover.

For example if you fall ill on holiday the money you would have to spend on care and treatment could easily run into the thousands - and the cost of taking out a basic level of travel insurance for a trip is minimal in comparison. Similarly if your belongings are stolen or your holiday cancelled, you could find yourself landed with a hefty bill - something that would be covered by a relatively small insurance premium.

So ensuring you have adequate cover is definitely worth considering when travelling outside of the UK, and taking the time to shop around for a competitive deal will really benefit you.

Also remember to look into your existing insurance policies to see if they might cover anything that you would otherwise have to take out travel insurance for. For example, your existing contents insurance may cover your baggage, meaning you can reduce your travel cover.

Pet Insurance

Pet insurance should be treated similarly to travel insurance, as although it is more of an optional cost, the cover will prove vital if you ever incur vets' fees. If your pet falls ill unexpectedly and needs treatment, the cover from your pet insurance will give you the peace of mind that your pet's well-being can be paid for.

If you find yourself in a situation where your pet needs treatment but you have no insurance cover, you'll have to shell out for your pet to have continued care. As vets' fees are so astronomical nowadays, you could quickly see yourself thousands of pounds out-of-pocket if your pet is uninsured.

If you aren't happy with the idea of paying for pet insurance when you don't know if you'll ever really need it, you may choose to put some money into a savings account instead. In this way the money that would have gone into paying premiums will be set aside for your pet if needed - and if you never need it, you won't have lost a penny.

Income Protection Insurance

It's fair to think of income protection insurance as high-priority insurance. If you fall ill, have an accident, are made unemployed or are otherwise unable to work, this will pay you a tax-free replacement income.

Protecting your income in this way could prove vital, especially if you have members of family whose well-being depends on the money you earn, or if you are self-employed and would not be able to keep up the cost of living on your own.

If you find yourself unable to work, losing that line of income could make unemployment even harder to deal with, for yourself and your dependants. So paying out for income protection can give you the peace of mind that you and your family will stay afloat should your employment situation change dramatically.

It's still important to shop around for the right kind of cover however, and to only pay out for what you really need.

Mobile Phone Insurance

When you buy a mobile phone you may be persuaded to purchase some insurance in case you lose it or it's stolen. If you have a particularly valuable phone this may be useful, but generally the high cost of this kind of insurance makes keeping up premiums an uneconomical option. It's possible too to add your mobile phone to your contents insurance, rather than taking out separate cover.

Also, it's worth noting that insurance bought directly from your mobile phone retailer will generally cost you a lot more than if you bought it from a stand-alone insurer, so if you must protect your phone, take the time to shop around instead of settling for what your phone retailer offers you.

Similarly, it's often not worth taking out separate warranties from shops when you're buying new jewellery, a phone, a watch, and so on. This is because possessions such as these are quite often either protected by the manufacturer's guarantee or already covered on your contents insurance - so it's always worth checking the details of your contents cover to see exactly what's covered, and to avoid paying out twice for the same thing.

Generally the necessity for insurance, unless it is a legal requirement, depends on your own circumstances. If you are paying above the odds it may make more sense to shop around and find a more competitive deal, rather than cancelling your insurance altogether. It will also save you money to make sure you are only paying for what you really need - by getting cover that's adequate for you and that doesn't overlap with any other policies you have.