What does ‘insurance’ mean, and why should we have it?
According to the Online dictionary, it means, amongst other things, ‘a protective measure’.
So what do we need protection against? I guess the main thing about insurance is that it lets you pay a little bit over a long time, in case you are liable for paying out a big sum for something, sometime.
There a lots of different types of insurance. One of the most common personal types (things that insure your person) is life insurance. This provides money if you die. There are various types of term assurance and life cover, from simple lump sum payments when you die, to providing for funeral costs, providing ongoing payments if you leave behind underage children, or paying off the remainder of your mortgage.
A less pessimistic type of personal cover is health-related insurance. This includes medical, which covers treatment for and/or loss of income caused by medical conditions, or injury insurance, which is cover specifically in case of an injury.
Then there is insurance for your assets. Mostly this covers your house, its contents, and your car. If you have a business, there is insurance for commercial buildings, farms, stock and so forth.
Finally, there is insurance in case you do something wrong at work – indemnity insurance. This covers you against being liable personally if you make a mistake in your work that costs someone else. For example, if you are a surgeon, you may have insurance that pays out if you are found guilty of medical misadventure. If you are a project manager, you may have insurance that pays out if you make a mistake in your project that ends up costing your client lots of money.
Within each of these categories there are many variations and specific inclusions and exclusions. For example, car insurance often has extra cover just for broken windscreens.
Insurance companies put many rules around insurance cover. Sometimes insurance can be difficult to claim, as you have to prove that the reasons for the loss are valid in terms of the insurance rules. For example, whiplash is a very difficult injury to prove, so insurance companies often won’t pay out for it.
If you are unfamiliar with insurance, it’s definitely worthwhile getting some knowledgeable help from someone you can trust. Often an older family member or friend who has had insurance for some years can explain the basics, or you can talk to a financial advisor. Just remember that an advisor may be biased if he or she is getting paid commission by some of the insurance companies whose products they are offering.
Tags: house contents & car, indemnity, injury, life insurance, term assurance and life cover, whiplash