Insurance and the

need thereof?

When the unexpected happens, insurance is a way of protecting yourself and your belongings against a particular adverse event, for example, a burglary, an accident whilst on holiday or losing your income because of illness or even redundancy. In the event of any of these unwanted events happening, insurance can soften the blow by paying out an agreed amount or an amount to cover the loss or damage, as appropriate. Of course, it may not happen, but you have to decide whether you are willing or able to take that risk.

How it works?

Underwriting Criteria

The amount you pay for insurance will be based on the information you give the insurance company (the underwriter) and the type of risk you want to insure. Insurance companies use underwriting criteria, for example, where you live, if you smoke or what type of activity you would like to be covered to help them work out the price (premium) of the insurance.

Specialist Insurers

You might find that some insurance companies may not
be able to give you a price for the cover you need. This could be because that particular insurance company doesn't offer insurance for the type of risk you want to insure (for example things like antiques or vintage cars).
If you want this type of insurance you might have to go to a company that specialises in this type of insurance cover.

The importance of correct

information

The insurance company agrees to pay out if the event which you're insuring against happens. For example, your travel insurance policy may pay out for loss of luggage.
It is important that you give the insurance company the correct information when buying insurance as incorrect information might affect your claim.

Premiums

You pay either a sum for the whole year (or sometimes longer), called a single premium, or a regular premium, usually monthly, for the policy.

Renewal

Most insurance lasts for one year at a time and you can renew your policy when it ends, or go somewhere else
for a better deal. But make sure you don't lose out by switching and always check that a new policy covers what you need it for. Always compare what's covered by a policy, not just the price. Some might be cheaper than others, but they may not offer the same level of protection.