What is insurance?
Put simply, insurance is when you typically pay a monthly fee to your chosen insurer in order to protect a specific thing of value to you; this could be loss of income, property or personal belongings etc. Then if anything goes wrong, you can make a claim on that insurance for them to give you money to help replace what you have lost.
Why might I need insurance?
To protect yourself, your family and your stuff against any unexpected adversity, for example, a car accident, sickness while on holiday or a stolen bike.
A good insurance is your road to quick recovery; if the misfortune happens, the insurance company can step in, helping you sail through with as little disruption as possible. It bestows peace in what can be traumatic moments of your life, and ultimately means you won’t be on the streets if the roof over your head burns down!
It is basically your own personal, human-sized safety-net.
What types of insurance are there?
- Breakdown – covers the cost of repairing an item if it fails due to general wear and tear.
- General product – covers the replacement or repair of an item after a calamity such as fire, flooding or theft. Some insurance policies offer additional cover for ‘accidental damage’ – this is an unintentional mishap by the owner or someone associated with them – for example dropping your phone down the loo!
- Payment protection – pays a financial commitment (usually payments on a credit product) in the event of illness or loss of income.
- Income protection – pays an income if you find yourself unemployed or can’t work temporarily due to illness or an accident.
- Critical illness – provides a lump sum or income if you are diagnosed with a serious, long-term/life threatening illness.
- Life – provides those you nominate with a lump sum of money if you die.
- Health (and dental!) – covers the cost of private medical treatment.
A good insurance is your road to quick recovery
What should I be thinking about before I buy?
All insurance products have a policy document full of small print which sets out the rules – read this very carefully! Are there exceptions or maximum pay out amounts? Do you have to act in a certain way to ensure the insurance is valid? Make sure you know the facts. You need to be confident that you understand the policy and check that there isn’t something in it that means you are unlikely to be able to claim.
Many insurance products have an ‘excess’, this is the first amount of any claim that won’t be covered by the insurance. For example, if the excess on your car insurance is £100 and you put in a claim for damage totalling £750, the insurance will only pay out £650.