When is FSCS cover triggered?

Deposits

FSCS is triggered when an authorised deposit taker (such as a bank, building society or credit union) is unable, or likely to be unable, to repay its depositors. Joint account holders are each entitled to claim compensation.

General insurance

Policyholder protection is triggered if an authorised insurer is unable, or likely to be unable, to meet claims against it, for example if it has been placed in provisional liquidation or administration.

Long-term insurance (e.g. pensions and life assurance)

Policyholder protection is triggered if an authorised insurer is unable, or likely to be unable, to meet claims against it, for example if it has been placed in provisional liquidation or administration.

General insurance advice and arranging

FSCS will safeguard policyholders if an authorised firm is unable, or likely to be unable, to pay claims against it, for example if it has been placed in provisional liquidation or administration. For example, FSCS may provide:

  • a return of premium or compensation in respect of an outstanding claim;

  • compensation in respect of insufficient cover, or if the customer is not told about a relevant exclusion in the contract, which causes the insurer to reject the claim;

  • compensation in the event of fraud, for example, if premiums are inflated;

  • compensation if a secondary intermediary becomes insolvent before passing premiums to an insurer.

Investments

FSCS provides protection if an authorised investment firm is unable to pay claims against it. For example:

  • for loss arising from bad investment advice, poor investment management or misrepresentation;

  • when an authorised investment firm goes out of business and cannot return investments or money.

Investments covered include: stocks and shares; unit trusts; futures and options; personal pension plans and long-term investments such as mortgage endowments.

Home finance (e.g. mortgage) advice and arranging

The main area of mortgage advice that may give rise to a claim falling within the remit of FSCS relates to the suitability of that advice for the customer's circumstances at the time. For example:

  • if the customer is not advised about the different types of mortgage available and lost money as a result;

  • if the specific details of the mortgage chosen are incorrect and the customer lost money as a result;

  • if the customer is advised to switch mortgages but was not given an adequate explanation of why a switch should be made, and lost money as a result;

  • if the customer is advised to take out a lifetime mortgage that was unsuitable for his/her circumstances at the time and lost money as a result.

FSCS can pay compensation only for financial loss.

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