Think general insurance – think car and home insurance. General insurance is a branch that few mortgage advisers dare to tread, and that’s a shame. It covers risks that are more numerous than dying:
- Loss of property – cars, houses, diamond engagement rings and moon rockets.
- Loss from others suing you by negligence on your part – a loose slate that kills the postman or a faulty switch in your new product that maims children. Known as liability.
For businesses, loss can be insured against:
- Employees being sick or dying
- Those who owe you money not paying up – known as pecuniary
- Your business being non-operational because of say, a flood or fire, known as business interruption.
Now for some technical terms
Indemnity
The whole point about indemnity is that general insurance puts you back to a place that you were before you suffered a loss. This underpins all general insurance. Recompence can be made by:
- Hard cash
- Repairing the item such as the car
- Replacing the said item, for example delivering you a new TV that was stolen
- Reinstating the damaged building to what was before
Double Insurance
We moved house recently from a rented to a bought home and kept them both on for two months to unwind the tenancy agreement. We kept two contents insurance policies alive, which protected the same items. In this situation, the insurer would not pay out twice but would share the damage. The plans happened to be with the same insurer so they would have figured this out – thank you Tesco Finest.
Average
The opposite is where people don’t insure their goods for enough. The house has a reinstatement figure of £100,000 but to save money, the person only protects for £50,000. A claim for a damaged chimney of £1,000 would then be averaged down to half this – i.e. £500
Excess
You lose your phone while on holiday and ask the travel insurance company to compensate you for your iPhone. They will, but you have to pay the first £100 of the claim. This is known a the excess. Often compulsory to deter claims but also voluntary to reduce the premium. I pay the first £500 on my motor policy to keep the premium low.
