Insurance compensation information

Monday, February 20, 2012

Compensation

Occasionally, a financial firm goes out of business and can't pay money it owes you. You might be able to get compensation from the Financial Services Compensation Scheme (FSCS).

The scheme can compensate consumers if an authorised company is not able to pay the claims against it.

If you use an authorised firm you have access to available complaints procedures and compensation schemes if things go wrong. If you use an unauthorised firm you do not have this option.

What does the compensation scheme cover?

The Scheme covers investments, deposits and insurance. The Financial Services Compensation Scheme (FSCS) is a separate organisation from the FSA.

The Financial Services Compensation Scheme (FSCS) can only pay compensation when an authorised company is unable, or likely to be unable to pay the claims against it. In general, this is when a company has gone bust or ceased trading.

To qualify for compensation you need to be eligible within the FSCS rules. In general this means that you should be a private individual, although small businesses are also covered in some circumstances.

The Scheme will generally not cover 100% of your loss.

FSCS became operational on 1 December 2001, when the Financial Services and Markets Act 2000 came into force. FSCS replaced existing schemes at this time, including the Investors Compensation Scheme, Policyholders' Protection Scheme, Deposit Protection Scheme and Building Societies Investor Protection Scheme.

Why do I need insurance?