The main reasons for insurance are protection and security. More specifically, it is protection and security from risk. Risk comes in many forms – car accident, burglary or house fires to name but a few. The main question many ask, however, is why insurance is important and whether it really is possible to live without it.
Cover comes in many shapes and sizes. It all depends on what you want to insure. Cover plans for healthcare, car accidents and even the brick-and-mortar of your home are available from countless providers.
And then there are cover plans for what some might consider “niche” areas… Pet or even wedding insurance, for example!
Ultimately, it’s basically up to you as a customer – mainly, what do you consider important?
How insurance works – A quick breakdown
Insurance allows you to choose what you want to protect yourself against. So, for example: If you want to insure your car against accidents, your insurance provider will calculate the risk of your car having an accident. This includes finding out how old it is, if it has had accidents in the past and how good a driver you happen to be.
After the calculations are wracked up, you’ll be given what’s known as a premium – the monthly amount of money you have to pay to avail of insurance (should you need it in the future).
Voluntary vs. Compulsory Cover
At this point it would be pertinent to mention that certain types of insurance are compulsory. If we stick with cars as an example, it would be good to mention that third-party car insurance is compulsory in the UK (in fact, it’s compulsory in most countries).
Things to consider
If you’re unsure whether any kind of cover is necessary, simply consider what’s important to you.
- Do you dislike the long NHS queues, and would like to receive the best possible treatment at the best hospitals around the country? Then you may want to consider a health insurance plan.
- If you have a family, you may want to ensure that they’re taken care of when you’re gone. For this reason, many people consider taking out a life cover policy.
- Your home is your castle… and it’s where you keep most of your most valuable possessions. So, for many people it makes sense to take out a contents insurance policy and buildings cover.
Steps to Follow When You Buy Insurance
Buying insurance is actually a relatively straightforward process.
- First, you choose an cover policy. The policy is a document with a list of what you are protected against and what you aren’t protected against. A travel insurance policy may stipulate that they will pay your medical bills should you fall ill on holiday – but not if you’re doing something overtly dangerous, such as skiing.
- Once the policy is chosen, you simply pay a premium. Depending on the policy, you either pay on a monthly or a yearly basis. The amount you pay depends on a vast number of factors, most of which are related to risk. For example, younger, inexperienced drivers tend to pay higher premiums for their car cover.
- If the risk you’ve protected yourself against happens, you make a claim to the company. If everything is in order, you’ll either receive a payout from your insurer or (in the case of some health plans) your medical bills will simply be covered.