The average Brit would have to fork out more than £3,700 a year on premiums if they were to take out every type of insurance consumers are told is essential.
Considering the average salary works out to £17,771 after tax, it means over a fifth (21%) of their income would disappear on premiums before they have even paid a penny towards their mortgage, pension or a single household bill.
Clearly this is an unsustainable scenario, which highlights why protecting against every eventuality is beyond the financial means of most. Rather, households should ‘choose their battles’ and select those policies that provide the best value for their individual circumstances.
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How the costs add up
So what can the average Brit expect to pay for each of the various insurance policies out there? Well that depends very much on what we mean by the ‘average’ person, as the cost of premiums will vary greatly depending on the demographic and financial situation of the individual.
After much time perusing the ever-exciting Office of National Statistics website, we identified Mr Average as a married 39 year old with two children, who lives in a house worth £183,896 with monthly mortgage repayments of £1,050.
He also earns £23,556 (gross), drives a Ford Focus and is paying off a personal loan worth roughly £3,000. Armed with this information, we attained quotes for the various types of cover marketed at the general public, and this is what we found.
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| Type of cover | Insurer | Monthly Premium | Annual Premium |
| Life | Direct Line | £27.07 | £324.84 |
| Income Protection | Churchill | £39.60 | £475.20 |
| Critical illness | Direct Line | £82.55 | £990.60 |
| Personal Accident | Nationwide | £4.95 | £59.40 |
| Home and Contents | Barclays | £26.13 | £313.56 |
| Mortgage PPI | British Insurance | £39.38 | £472.56 |
| Car | Morethan | £40.79 | £489.48 |
| Breakdown | RAC | £5.26 | £63.12 |
| Pet | E&L | £16.70 | £200.40 |
| Travel | Insure & Go | £7.83 | £94.05 |
| Loan PPI | Moneybackbank | £16.30 | £195.60 |
| Mobile phone | Insurance for mobiles | £5.88 | £70.56 |
| | £312.44 | £3,749.28 |
What cover for you?
So there you have it. Take out all the main insurance policies and you’ll be down £312 a month. But with insurers insisting that every policy is essential, how do you differentiate between those you really need and those you can do without?
Price and affordability is the most obvious place to start, and unsurprisingly it’s the most important factor for most people. According to a recent Legal & General survey, 22% of people have mobile phone insurance while just 17% have critical illness cover.
This means one of two things: Either Brits value their phones above their health, or they are choosing insurance based on what they can realistically afford (as the above table shows, mobiles cost £6 to insure, while critical illness cover costs £83).
It’s worth noting that age plays a key role in how affordable certain types of insurance are. For example, younger people can get travel or life cover for far less than their older counterparts, who in turn can insure their car at a fraction of the cost.
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Factor in value
But of course choosing cover based solely on price is a dangerous precedent, as it means your money may not be wisely spent.
According to the L&G survey, life insurance (41%) is nearly three times as popular as income insurance (14%). And as the above table shows life insurance premiums are also notably lower, price is no doubt a key factor in people’s choice.
The problem is you are far, far more likely to need income protection to cover you against the risk of serious illness or injury than you are life insurance to cover your family against early death. So it’s essential you factor in how much value the insurance offers you as well.
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Make the essentials more affordable
The good news is there are ways of reducing the cost of insurance. The easiest and most effective way of doing so is by applying online rather than in branch. The difference can be astounding – Tesco offers a 50% discount for home insurance, while Saga will cut its car cover by 20%.
If you are in the market for payment protection insurance to cover a loan, it’s essential you don’t simply accept a policy from your lender. Opting for an independent policy instead can work out up to five times cheaper.
As an example, it cost £16.30 a month to tack on PPI with the loan from MoneyBack Bank, but British Insurance will offer the same policy for just £4.25.
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Extend existing cover and save
For those looking to cover expensive mobile gadgets, having ’all risks’ added to your existing contents insurance is almost always cheaper than insuring items separately. Specialist insurers lure customers with headlines like “Insure your iPod for only 8p a day”, but that works out to nearly £30 a year for just one gadget.
If you choose blanket coverage, those with mobile phone contracts are advised to check they are not already paying for phone insurance through their provider (again, this is usually at a far higher rate).
Finally, think about type of cover you need, as there is a massive price difference between a basic package and the top of the range one. But do you really need all the bells and whistles, or are you simply wasting money on things you’ll never need?
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