Insurance – An Overview
Insurance is a way of protecting yourself, your family
and your belongings against a particular adverse event,
such as an illness which may result in you losing your
income or an incident such as a burglary.
How insurance works?
The amount you pay for an
insurance policy will be based on
the information you provide to the
insurance company and the type of risk(s) that you want
to insure against.
Insurance companies use underwriting criteria (for
example, where you live, your age, medical details such
as whether you smoke or not) to help them work out the
price (or premium) of the insurance cover that they will
offer to provide.
In providing you with insurance cover, an insurance
company agrees to pay out if the event which you are
insuring against happens. For example, a travel insurance
policy may pay out for the loss of your luggage when
travelling.
You can often pay for an insurance policy by either paying
one sum for the whole year (or sometimes a longer term)
- this is called a single premium - or by paying premiums
regularly (for example, monthly). Regular premiums can
often be paid by direct debit.
There are some types of insurance which are designed to
be long term, such as life insurance. Most other types of
insurance are designed to provide you with cover for one
year at a time and then, when your policy expires, you
can either renew it with the same insurance company or
shop around for a better deal. If you do switch your
policy, make sure that you don't lose out and always
check that a new policy covers what you need it for.
Always compare what is covered by a policy, not just the
price alone. Some policies may be cheaper than others,
but they may not offer the same level of protection.
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