A good plan implemented today is better than a perfect plan implemented tomorrow. We do need insurance because the unexpected always lurks around the corner. If you’re burgled, insurance can pay for the stolen things. If you need medical treatment, it can pay for private healthcare, and even replace some of your income if you can’t work. If you die, it pays out a lump sum to the family you leave behind.
Insurance is a way of protection of you and your belongings against a calamity (e.g. burglary, illness…). In such cases, insurance will pay out an agreed amount or an amount to cover the damage. Of course, it may not happen, but you have to decide whether you will or can take that risk. Some insurance, like motor insurance, is compulsory – you have to have it if you drive.
The amount you pay for insurance is 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, (e.g. where you live, type of insurance etc.) to help them work out the price (premium) of the insurance. The insurance company agrees to pay out if the event which you’re insuring against happens. You pay either a sum for the whole year (or longer) – single premium, or a regular premium, usually monthly, into the policy.
Most insurance lasts for one year and you can renew your policy when it ends or find a better deal. However, make sure that you really do profit from it and always check that a new policy covers what you need it for. The price is not the only factor. Endowment is a type of life insurance which has become very popular. It is a regular-premium savings plan in which payments are made monthly. The money is invested, usually in a selection of stocks and shares, and at the end of the agreed period you will receive a lump sum. Endowments also have an element of life insurance cover, which will pay out a lump sum if the investor dies before the agreed term.
