The Insurance You Actually Need Isn't the Insurance You're Sold
Extended warranties and gadget cover are high-margin products insurers push hard, income protection that people skip is the one that matters most.
By Firoz Khan|16 July 2026|Updated 20 September 2026|9 min read
You've probably been offered extended warranty cover at checkout more times than you've been offered income protection insurance in your entire life, and that ordering tells you exactly which products make insurers and retailers the most margin, not which ones actually protect you. Extended warranties carry some of the highest profit margins in retail, some estimates put the payout ratio at under 20% of what's collected in premiums, because most items don't fail in the window and the ones that do are often covered by consumer rights law anyway. Meanwhile the insurance that would actually replace your income if you couldn't work goes unsold because it's harder to explain in thirty seconds at a till. Here's what's actually worth having.
Income protection
Income protection pays you a regular income, typically 50% to 70% of your salary, if you're unable to work due to illness or injury, for as long as you're unable to work, up to a set age or a set benefit period depending on the policy. This is the insurance most people underrate, because Statutory Sick Pay is only £118.75 a week, nowhere near enough to cover most people's actual outgoings, and many employers only offer full pay for a matter of weeks or months before dropping to statutory levels. If you're self-employed, there's no employer safety net at all, making income protection arguably the single most important policy available to you, above life insurance, because you're statistically far more likely to be unable to work for an extended period than to die during your working years.
Life insurance
Life insurance pays out a lump sum or ongoing income to your dependants if you die during the policy term, and it matters most when someone else's financial security depends on your income, a partner, children, a joint mortgage. If nobody relies on your income, life insurance is largely unnecessary, no matter how it's pitched to you. If you do have dependants, term life insurance (cover for a fixed period, usually until a mortgage is paid off or children are financially independent) is generally better value than whole-of-life cover for most people, because whole-of-life policies are priced to guarantee a payout eventually and cost substantially more as a result. Decreasing term life insurance, where the cover reduces roughly in line with a repayment mortgage balance, is often the cheapest sensible option for mortgage-holders specifically.
Critical illness cover
Critical illness cover pays a lump sum if you're diagnosed with a specified serious illness (certain cancers, heart attack, stroke, among others) listed in the policy, regardless of whether you're able to keep working. It's often bundled alongside life insurance and sold as complementary, but it fills a different gap: a lump sum for costs like home adaptations, private treatment, or clearing a mortgage entirely, rather than replacing lost income like income protection does. It's worth having if you can afford it alongside the more essential income protection, but read the policy's list of covered conditions carefully, insurers vary meaningfully in how strictly they define 'critical', and a condition that feels covered in the marketing can be excluded in the policy wording.
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Home and contents insurance basics
Buildings insurance covers the structure of your home and is required by mortgage lenders, contents insurance covers what's inside and is optional but sensible for most people. The most common mistake is underinsuring contents, guessing a total value rather than actually totting up what replacing everything would cost, which can leave you significantly short in a genuine total loss like a fire. Check whether your policy is 'new for old' (replaces items at current value) or covers actual cash value (depreciated value, meaning your five-year-old TV pays out at what it's worth now, not what a replacement costs), the difference matters enormously in a real claim.
Why extended warranties are usually bad value
Most electronics that are going to fail, fail either very early (covered by the manufacturer's standard warranty and, in the UK, by the Consumer Rights Act which gives you protection for up to 6 years on goods that were faulty when sold) or well after any extended warranty period ends. The extended warranty covers a narrow middle window that, statistically, relatively few items fail within, which is exactly why the payout ratio is so low and the margin so high for whoever's selling it. If you're offered one at checkout, decline by default and rely on your statutory consumer rights and the manufacturer's warranty instead, they cover more than most people realise.
Comparison site traps
Comparison sites are genuinely useful for surfacing the cheapest headline price, but the cheapest price and the best value policy aren't always the same thing, insurers can strip out cover elements (accidental damage, personal possessions away from home, legal expenses) to hit a lower price point that ranks well, while a slightly pricier policy from a different provider includes far more as standard. Always click through to compare what's actually included, not just the number at the top, and be aware that some insurers deliberately don't appear on major comparison sites at all, so checking two or three sites plus a couple of direct insurer quotes gives a genuinely fuller picture than relying on one aggregator alone.
Bundling and add-ons to be wary of
Add-ons sold alongside a main policy, gadget cover, legal expenses cover, key cover, breakdown cover bundled into car insurance, are often priced far higher than buying the equivalent standalone, because the moment of purchase (you're already committed to buying insurance) is when you're least likely to price-check an add-on. Before accepting any bundled extra, check what it would cost as a standalone product elsewhere, the gap is frequently substantial.
Where most people get this wrong
The most common mistake is being over-insured on low-stakes items (gadget cover, extended warranties, travel insurance add-ons for trips you're not taking) while being under-insured or entirely uninsured on the one thing that would actually be financially devastating: losing your income to illness or injury for an extended period. Prioritise in this order: income protection if you have dependants or no employer sick pay safety net, life insurance if someone depends on your income, adequate home and contents cover reflecting real replacement value, then consider critical illness cover if budget allows. Everything sold at a checkout counter or as a tick-box add-on deserves scepticism by default, not because insurance itself is a scam, but because the products pushed hardest at the point of sale are consistently the ones with the worst value for the buyer.
A reminder
The FCA risk warning still applies to higher-risk crypto content. Always assess how much risk you are willing to take before buying.
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