Why UK insurance compensation protection splits into two tiers, 100% for compulsory and long-term cover, 90% for most general insurance, and what counts as which.
Last reviewed: 1 July 2026
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BEFORE YOU BUY |
UK insurance compensation protection is not a single flat rate. The Financial Services Compensation Scheme (FSCS) splits protection into two main tiers depending on whether a policy is compulsory under law, or classed as long-term insurance, versus general insurance that a person chooses to take out.
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KEY FACTS
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What counts as compulsory insurance
Compulsory insurance refers to cover a person or business is legally required to hold. In the UK this includes third-party motor insurance, required under the Road Traffic Act, and employer's liability insurance, required for almost all UK employers. Because the law mandates these covers, the FSCS protects claims against them in full if the insurer fails.
What counts as non-compulsory general insurance
Most other personal insurance products fall into the general insurance category and are not required by law. This includes home insurance, contents insurance, travel insurance, and pet insurance. These are protected at 90% of an eligible claim if the insurer fails, meaning a policyholder could be responsible for the remaining 10%.
Why long-term insurance sits with the 100% tier
Long-term insurance, principally life assurance and certain annuities, is treated the same as compulsory insurance and protected at 100%. This reflects the long time horizon and the significant reliance placed on these products by policyholders and their families.
Which insurance types sit in which FSCS tier
| Tier | Protection Level | Examples |
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| Compulsory | 100% | Motor third-party, employer's liability |
| Long-term insurance | 100% | Life assurance, some annuities |
| Professional indemnity | 100% | Advisers, brokers, some contractors |
| Building guarantee (post 8 Oct 2020) | 100% | New-build structural warranties |
| General insurance | 90% | Home, travel, pet, contents |
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100% tier vs 90% tier Compulsory, long-term, professional indemnity: 100% General insurance: 90% |
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Worked Example: Two claims, same value, different outcomes Two policyholders each have an £8,000 claim outstanding when their shared insurer fails. One holds compulsory employer's liability cover and receives the full £8,000. The other holds a contents insurance policy, which falls under the 90% general insurance tier, and receives £7,200, an £800 shortfall driven entirely by which tier the policy sits in, not by the size of the claim. |
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This article is general information, not financial or legal advice. Rules and limits can change: always check the current position with the regulator or scheme concerned before relying on any figure here. |
Is pet insurance protected at 100% or 90%?
Pet insurance is general insurance and is not compulsory under UK law, so it is protected at 90% of an eligible claim if the insurer fails.
Is professional indemnity insurance compulsory?
Professional indemnity insurance is not universally compulsory, but the FSCS still protects it at 100%, alongside compulsory insurance and long-term insurance.
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Related Guides |
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Sources |
