If a UK-regulated insurer fails, the Financial Services Compensation Scheme steps in. For most general insurance, including home, motor own damage, travel and pet, FSCS protects 90% of a valid claim with no upper cap. A smaller group is protected at 100%: compulsory cover such as third-party motor and employers’ liability, professional indemnity insurance, and claims arising from death or incapacity. The failed firm must have been regulated by the Prudential Regulation Authority for the protection to apply.

Insurer failures are rare, but they are not theoretical: policyholders of failed insurers discover in a hurry what the compensation rules actually say. The scheme is also a quiet argument for checking who ultimately stands behind a cheap policy before buying it.

What FSCS is

The Financial Services Compensation Scheme is the UK’s statutory compensation fund of last resort. It costs the policyholder nothing to use, is funded by levies on the financial services industry, and exists precisely for the moment a regulated firm cannot pay claims against it.

The 90% rule

For general insurance that is not in a protected 100% category, FSCS protects 90% of the claim, without an upper limit. That includes the lines most households hold: buildings and contents, the own-damage part of motor cover, travel, pet, warranty and health policies.

The same 90% figure applies to premium refunds where a policy is not replaced: FSCS states it can only repay 90% of the calculated refund.

The 100% categories

Some cover is judged too important to discount. Third-party motor liability and employers’ liability, both compulsory by law, are protected in full. So is professional indemnity insurance, and so are claims that arise from the death or incapacity of the policyholder through injury or sickness. Long-term insurance, such as whole of life and term life policies, is also protected at 100%.

For a business, the professional indemnity line matters: if the insurer behind a PI policy fails, the claim is protected in full.

The condition people miss

Protection depends on the failed insurer having been regulated by the Prudential Regulation Authority. That is worth thirty seconds of checking at the point of sale, because policies sold into the UK through unusual structures can sit outside the net. Who regulates the insurer is a question a broker answers as part of placing the risk.

Common questions

How much of my home insurance claim is protected if my insurer fails?

90% of the valid claim, with no upper cap. Home insurance is not one of the 100% categories.

Which insurance is protected at 100%?

Compulsory cover such as third-party motor and employers’ liability, professional indemnity insurance, life and critical illness policies, and claims arising from death or incapacity due to injury or sickness.

Is there a cap on FSCS insurance compensation?

No monetary cap for insurance claims: protection is a percentage of the claim, 90% or 100% depending on the type of cover.

Do I have to pay to use FSCS?

No. FSCS is free to consumers and funded by industry levies.

How do I know my insurer is covered by FSCS?

The insurer must have been PRA-regulated. The Financial Services Register shows who regulates a firm, and checking is part of a broker’s job when recommending an insurer.

Related guides

This page is general information about FSCS protection for insurance policies, not advice. Percentages and categories are as published by FSCS and can change: check fscs.org.uk for the current position.

Solar Insurance Services (Medway) Limited is registered in England and Wales, company number 05439438, and is authorised and regulated by the Financial Conduct Authority, firm reference number 459582.

Sources: Financial Services Compensation Scheme, What we cover: insurance (fscs.org.uk).