Delving into the world of insurance can be overwhelming, it can feel as if here are policies for everything: your home, your phone, your car, travel, your house and even your life!
In this blog entry, I will discuss my personal experience with insurance and why I chose the policies I did, in a way which I hope will be useful to you.
According to Merriam-Webster, an insurance policy is a contract whereby one party (the insurer) agrees to cover the financial price incurred by the second party (the insured) for a “specific contingency or peril”. This can apply to the loss or damage of material property, covering the costs of healthcare, or many other situations. Some are mandatory (such as vehicle insurance if you own a motorised vehicle), but most are optional and taken out as a conscious choice by individuals. Personally, I have home contents insurance, as well as travel and health insurance for medical care abroad. I have been told by friends that it is a waste of money, and that the odds of something bad happening are so low that there is no point in having insurance. I disagree, and will explain why.
Whether or not you take out an insurance policy is an inherent bet on your financial future. I like to compare it to Pascal’s Wager on the existence of God. Pascal poses that the reasonable person should believe in God’s existence as they have nothing to lose and all the gain: he balances the sacrifice of faith with the potential of eternal life in heaven or hell. He concludes that one is better off believing in God on the off chance that they will go to paradise, rather than to not believe and maybe end up in hell. While this might be rightly be criticized as a simplistic reason to believe in God (promise I am not trying to convert you to religion), the same logic can be applied to insurance policies. However faint the chance of a bad or even catastrophic event may be, it is more reasonable to make the small sacrifice of a monthly payment rather than the huge price tag associated with replacing stolen objects after a robbery or paying for a medical bill when you’re ill in a foreign country.
On its most basic level, insurance is a simple concept. You agree to contribute to a pot of money along with other people, with the money being redistributed to contributors who need it for exceptional events. This could or could not be you, but if it is, you will often receive a lot more money than what you contributed, making the idea worth it for each participant. Of course, insurers are private for-profit companies, so it is not as simple as just contributing money to a common pot, but the image is still relevant. In my case, I am currently renting an old house in South London with an iffy front door. I own about £2,500 of stuff in that house, including my £800 piano that I received as my 21st birthday present. I feel much safer paying the quoted £5.30 a month rather than facing the risk of being left with nothing if something happened (robbery, fire, flood).
This is a decision each person has to take for themselves, considering their situation and what risks they are willing to take. For example, I don’t have any insurance for my bike, because I never leave it anywhere else than inside my house or the protected campus bike sheds. I felt as if a solid lock was a better investment. You may disagree if you are often parking your bike in the streets in London and are scared of the rampant bike thieves targeting your trusted steed. Conversely, you might not feel as if you need home contents insurance like the one I do as you live in safe and guarded student halls. It is up to you to decide what you think is necessary for your situation, what risks you are willing to take.
Now that we’ve discussed why you should or shouldn’t take out an insurance policy, let’s talk about the different types of insurance you can get:
- House (contents) insurance – covers the contents of your household or apartment in case of a robbery, fire, or other incidents. Cover is based on the total value of your possessions, although you may need to add separate clauses for particularly valuable objects such as musical instruments or expensive jewellery. Remember that for your claim to be valid in case of a robbery, you will need a police report proving that someone broke and entered into your property. Insurance is not a reason for leaving your doors unlocked!
- Electronics insurance – covers the damage/loss/theft of your phone, computer, or other item. You can personalise these to cover your house, the university campus or anywhere, as well as options for an immediate replacement device if needed.
- Bike insurance – covers your bike in case of damage/loss/theft. Resembles electronics insurance in its options.
- Car insurance – mandatory if you own a car, will cover you for accidents and damages caused to yourself, your car, or a third party and their car.
- Travel insurance – covers unexpected travel expenses linked to cancellations, delays, lost luggage, and can cover medical expenses abroad. Travel insurance can be taken out individually for a trip (you will see the option as you book your travel), or as a long-term policy. You might find that your parents already have travel insurance for you, or maybe you have it as part of a subscription, such as Monzo or Revolut premium.
- Health insurance – covers any health and medical related costs. In the UK it is not as widespread as the NHS is free at the point of care, however it may be necessary for international students or if you want to access private care. Again, your parents may already have health protection cover for you.
- Life insurance – offers compensation to family or loved ones in the case where the policy taker dies. You will see insurance companies offer you discounted prices to incentivise you to start a life insurance policy as young as possible, however it is not really useful until you have people dependant on you, notably a stable partner or children who would financially suffer from losing you.
Once you have decided what insurance you want to take out, you need to find an insurance broker to take out a policy with. There are many options on the market, all jostling to get your business, so take the time to look around and find the best deal you can. I used websites such as savethestudent.org and uswitch.com to compare different offers and get the best price for my home contents insurance, which ended up being with Endsleigh. I have had it for three years and have never had to claim anything but I’m glad the protection is there if I need it. As for travel and health insurance, I get those through my Revolut premium subscription. Travel insurance has actually come in handy recently with the current mess of international plane travel, I have been able to get compensated for cancelled and delayed flights.
In conclusion, I hope that you have gained some understanding of insurance and what different options are available to you as a student, as well as given you some food for thought about whether you should get insurance. From my experience, I recommend getting your household contents covered, as you never know what could happen and losing everything is a devastating event emotionally, don’t let it be so financially as well. As for other insurance covers, the choice is up to you.
Amon Kenna Ette
King’s Student Money Mentor
Part of Money & Housing Advice
The King’s Student Money Mentors blog shares our students’ personal experiences and thoughts on money-related topics. Any reference, opinions or recommendations on a particular company/brand are only the views of the student(s) who wrote the blog post. King’s College London, the Money & Housing Advice service and the Money Mentor project do not share the views in the blogs nor endorse any of the companies mentioned. Readers should conduct their own research before using any companies mentioned in our blog posts.
