Insurance is for life, health, income - and even your brontosaurus
HAVE you ever had trouble with badgers damaging your swimming pool? This, and many more unusual situations, can be covered by insurance, and Aviva have produced a list of their more wildly unusual insurance claims, which we'll look at later on.
It all goes to show, not many people realise how diverse and flexible insurance can be.
Even for those of us who don't have their own swimming pool, insurance can protect our life, our health, and our income.
Let's start with a rather sad fact. Around one child in 29 loses a parent before they grow up. This is a great personal loss, of course, but it is also the loss of an income. It can throw the family finances into chaos, and even jeopardise the child's chances of progressing to further education.
There have in the past been situations where a surviving spouse with two children is faced with the heartbreaking situation: she can only afford to help with one education – and so must decide which child cannot go.
The solution, of course, is to insure your life. The good news is that life insurance is cheaper than it used to be, and for your dependents, there will be no tax to pay on the payout. Nonetheless, it does pay to shop around for the best policy and the Association of British Insurers has in the past warned against simply using price comparison websites. As the companies on these websites compete to make a quick sale to you, they are unlikely to take the time to ask questions about your personal circumstances and needs. The best way is, of course, the human-to-human approach – seek the help of a financial adviser.
Couples can opt for a joint life policy, which pays out once on the first death. Alternatively they can opt for two single policies, which may be a little more expensive, but ensures that both deaths are covered.
To cover your health and protect your income against unexpected serious illness, there is critical illness insurance, or ‘CI'. This provides a tax-free lump sum if you are hit by one of the conditions covered by your policy.
How much cover you need depends on what you want the cover to do. The payout can pay off your mortgage and debts, for instance, but policies vary and applications can be complex so again, talking to an adviser is a sensible idea.
People often underestimate how common critical illnesses are – ‘It'll never happen to me.'
The fact is, critical illness is likely to befall a quarter of men, and a fifth of women before they retire, thus cutting short their working life. Despite this, only 16 per cent of people have taken cover to protect themselves against loss of income through a serious health setback, according to Aviva.
Which brings me, as promised, to some of the more unusual ways that insurance can be used, according to Aviva, who have seen it all over the past decade.
Clients have insured all kinds of strange objects, the craziest being a life-sized fibreglass model of a brontosaurus. Another wealthy client insured a vintage 1970s Ferrari F1, even though he never drove it, but kept it on a plinth in the hallway of his house. Another insured a decommissioned MIG fighter plane he had sitting in his back garden.
There have also been claims based on a number of situations that range from the unusual to the downright weird.
‘A badger ate my swimming pool'. This was a damage claim after the animal had chewed and scratched the lining of the pool. In support of the claim, the customer took a forensic approach and sent badger fur retrieved from the pool's filter.
Then there was the scuba diving enthusiast adjusting his harpoon gun. It went off, sending the harpoon through the bedroom wall and blowing the electrics.
I think all this demonstrates the diverse situations we can ‘make safe' with insurance. And while we don't all own a fighter plane or a Ferrari, we all have an income, and perhaps a family to protect.
I'll leave the last word to Richard Alger, Aviva's insurance expert for wealthy clients, who cannot be shocked any more by even the strangest insurance claim.
“It can be difficult putting a value on a one-off item like a life-size brontosaurus.”
Michael Kennedy is an independent financial adviser and pensions specialist, and can be contacted on 028 71886005