The UK’s insurance industry is the largest in Europe and the fourth largest in the world, managing investments of over £1.8 trillion.

There are dozens of types of insurance available in the UK. Some insurance is compulsory, or as close to it as you can get, while other types are entirely optionally. Essentially, it is up to the consumer to do their research and decide whether or not a policy is needed.

This article gives a basic overview of what insurance is and outlines a few of the main types available.

What is insurance?

Insurance is a contract in which the policyholder receives financial protection from the provider for specific kinds of losses in exchange for agreed payments.

There are many different kinds of insurance, from home insurance to blackjack insurance payouts for players when the dealer is holding an Ace. In this case, the option protects against the possibility of the dealer hitting 21.

This is actually a good example of how insurance works. The policyholder pays a fee, known as a premium, and in return they are insured against a worse case scenario.

Insurance companies, or the house as is the case in blackjack, make money off a combination of everyone’s premiums. The player, in return, puts a stopper on their losses.

Car insurance

Car insurance is compulsory for all vehicle owners, whether you are driving the vehicle or not, unless it is declared off road (SORN). It’s a major cost, but one that protects you from damages in the event of an accident.

Consumers do have a choice as to which type of car insurance to opt for. There are several levels of coverage:

Third party – This covers damages to other parties, but does not cover your own costs. It is the minimum legal level of car insurance required.

Third party, fire and theft – As above, and you are also covered in the event of theft or damage from fire.

Comprehensive – As above, and also includes cover of damages to your own vehicle in the event of accident. May also include extras such as roadside assist and courtesy cars.

The average price of insurance in the UK is £416 per year. The actual price drivers pay depends on a number of factors such as age, vehicle type and modifications, and length of no no-claims bonus.

Social insurance

All employed and self employed people in the UK already make compulsory payments to a social security scheme, National Insurance.

These payments contribute to state pensions, employment benefits, and bereavement support among other services.

The current rate of NI is 12 percent for weekly earnings over £166.

Home insurance

It’s not a legal requirement for homeowner to have insurance for their property. However, it is nearly always a condition when it comes to getting a mortgage. The mortgage provider wants assurance that the building will be protected, and so insurance will be written into the contract.

For those who do buy their homes outright, insurance is still an option. Policies usually cover damages to the property’s structure, as well as permanent fixtures and fittings. General wear and tear is not often covered.

Renters are not obligated to take care of repairs to building structure, and so it is the landlord who has a duty to insure the property. Contents insurance is available for renters who want to protect possessions.

Health and dental

The UK is fortunate to have a tax based healthcare system, the NHS, which provides comprehensive healthcare to all residents. This means that health insurance is not often necessary and no where near as big a market as in the USA.

However, there’s still the option to take out private healthcare schemes. The costs very much depend on circumstances and extent of cover. The potential benefits could include better facilities, access to specialists, and shorter waiting times.

A similar situation applies to dental care. In this case, the NHS charges a set price for ‘Bands’ of treatment, with free dental care offered in certain situations. Private dental care plans are available for those who want it and can afford it.

Other types of insurance

Other types of insurance available and entirely optional in the UK are:

• Life insurance – policies to financially protect dependents in the case of death or injury
• Commercial insurance – for business owners, who need varying degrees of insurance protection to operate legally
• Travel insurance – policies to cover trips abroad, from medical emergencies to lost luggage