The insurance I ALWAYS take out – and the cover I never bother with: SALLY HAMILTON

Sally Hamilton is a consumer expert with decades of experience and writes Money Mail’s Sally Sorts It column. She reveals the insurance cover that’s essential and worth paying for and what to skip.

‘We won’t make a drama out of a crisis’, ran a well-known insurance company campaign from the 1980s, with one memorable TV ad one showing a car owner watching in horror as his vehicle is blown off a cliff.

This dramatic scene aimed to persuade viewers that their insurance provides peace of mind. Fair enough, but are there some risks where insurance is a ‘must’, and others where you might choose to say ‘no’ to cover and instead ‘self-insure’?

I’m a consumer journalist, and on the whole an advocate of insurance, but there are certain things I will never insure.

Let’s start with those policies that are a must. By law, drivers are obliged to buy insurance for their motor. Even if it wasn’t compulsory, I wouldn’t forego it. Without it, if things go wrong, costs can be astronomical, especially if the owner must replace a written-off car or worse, cough up for damages for another driver’s injuries.

There are other policies I will not go without. Buildings insurance for a home is not a legal requirement – though it is usually demanded by lenders when a property is purchased with a mortgage. 

It’s central to my financial and mental wellbeing to have it in place because like most people I could not afford the cost of rebuilding if my home was burnt to the ground.

I also pay for contents cover as replacing the hundreds of items I’ve amassed over the years would be costly. 

There are some policies which are a must, such as driving insurance which is required by law and helps to cover costly repair bills

My brother takes a different view – he has never purchased contents cover, feeling he could start from scratch and replace items gradually should his possessions be stolen or damaged. To date, he has never been burgled or had contents damaged – I’m sure he’s got his fingers crossed – but his savings on premiums have been substantial.

I reckon my husband and I have paid about £30,000 on buildings and contents cover over three decades. 

Until recently, I pondered the value of this outlay as we’d made only one small claim after our toddler flung a cricket ball through our bay window and that was more than 20 years ago. 

But then, 16 months ago we suffered an incident where thousands of gallons of water escaped from a burst pipe in our bathroom. This led to serious damage to our beloved home – and a six-figure repair bill. 

By that point, mortgage free, we could have easily forgone buildings cover. Thank goodness we didn’t as our insurer met the scary bills.

Travel insurance 

It is not usually obligatory to take out cover for holidays – though we recently arranged a transatlantic ship crossing for this coming autumn where before the booking was confirmed we had to state that we had insurance in place that included cruise cover. Fortunately, I did. But in any case, I will never leave home without travel insurance.

I have spent hundreds of pounds on premiums over the decades. But just one medical claim a few years back has recouped much of these costs. 

My insurer met the £850 bill for my mountain rescue and treatment following a freak encounter with a French ski lift that dislocated a knee-cap – and I wasn’t even on a ski holiday.

I am less concerned about holiday cancellation costs than health matters. While these can be significant, at least there is a ceiling on the losses from a cancelled trip. But medical bills are unpredictable and can scale loftier heights than my medical claim – as anyone who read my Sally Sorts It column two weeks ago will know.

Following my intervention, a young holidaymaker who suffered a cardiac arrest last year while in the US (one of the most expensive countries in the world to suffer a medical incident) is having his estimated $100,000 bills met by his insurance from an annual travel policy that cost him just £90.

The insurance I want but am careful about buying 

Then there are insurances I want but am careful how I buy.

I always purchase car hire cover – as driving abroad carries extra risks when roads are unfamiliar. These policies are designed to cover the excess on a hire firm’s insurance claim – typically £1,500-£2,000 – which is charged to the driver if the vehicle is damaged or stolen. 

But I never take the policy pushed on me at the car hire desk. Staff do the hard sell on these plans – and no wonder as some rake in premiums as high as £25 for each day of the hire. Instead, I take out a standalone policy from a specialist provider. My worldwide plan costs £50 a year and gives me the reassurance I crave when driving abroad.

Private medical insurance is a luxury that I personally can’t justify – but maybe I would if my budget could stand it. As a compromise I recently paid to see a consultant privately. 

This cost me £300, sped up my diagnosis and got me on to the NHS waiting list more quickly – with my operation carried out by the same highly regarded consultant I’d seen privately.

My self-insurance pot

This £300 came from my ‘self-insurance pot’. This is what I turn to in situations when I do not have an insurance policy to claim on. It is an easy access savings account my husband and I pay into regularly and dip into for emergencies such as when the fridge breaks down, the washing machine packs up or the heating goes on the blink. 

This is instead of paying premiums to an insurer that promises to repair or replace such items. 

We prefer to take on such costs ourselves. The price of replacing a fridge is predictable and manageable and there is no argument with an insurer over whether or not it will meet a claim.

Why I’d never pay for this insurance 

Similarly, I brush off sales staff who want to sell me a warranty on goods. It is a type of insurance many shoppers are offered alongside their purchase that promises repairs or replacement if something goes wrong. 

A recent example was when it was suggested I take one for a new mattress, but I failed to see the benefit. Apparently, if I spilt something on the mattress, they would send me the cleaning materials. I think I can source those myself!

Instead of purchasing warranties, I prefer to rely on the powerful statutory rights I already have as a consumer. The mainstay is the Consumer Rights Act 2015. 

It says that items consumers purchase must be of a satisfactory quality, fit for purpose and last a reasonable length of time – and if not (depending on when an issue arises after purchase) I should be able to get the retailer to repair, replace or refund me, without having to claim on a warranty.

Is pet insurance worth it? 

It is a shade greyer for some other types of cover, such as pet insurance. We took a gamble and did not take cover for our two exotic shorthair cats, who lived to the ripe old age of 17 and 18. The breed is known for its robust health, and this remained the case for about 15 years. 

Most of that time we only paid for their annual feline flu jabs – which wouldn’t have been covered by insurance anyway – and one visit where the female cat was bitten by a squirrel. In their last year or two, vet bills did mount, with visits made for various tests and life-extending medications and other costs linked to their old age – and ultimately their cremations – coming to perhaps £3,000 in total.

I reckon we spent half what we might have done on premiums over the years. 

However, I realise we were lucky – and if we had owned a dog, I would have swallowed the pill and purchased cover as vet bills often work out higher for canines.

Not everyone is fortunate enough to be able build a cash cushion for the eventualities I describe – so insurance can be the belts and braces option to fall back on so you can sleep at night. 

But the earlier you start a self-insurance fund, the more likely it will be able to help meet some of those unwanted bills.

SAVE MONEY, MAKE MONEY

Isa cashback

Isa cashback

Up to £3,000 on new accounts and transfers

Fix energy bills

Fix energy bills

Check price cap beating deals with uSwitch

Fee-free Isa investing

Fee-free Isa investing

Free share and ETF dealing, no account fee

4.85% cash Isa

4.85% cash Isa

Flexible cash Isa with unlimited withdrawals

Sipp cashback

Sipp cashback

Up to £3,000 when you open a Sipp by 5 April

Affiliate links: If you take out a product This is Money may earn a commission. These deals are chosen by our editorial team, as we think they are worth highlighting. This does not affect our editorial independence. Terms and conditions apply on all offers.