Insurance is a financial agreement in which you pay a regular premium to an insurer, and in return the company agrees to cover specified losses. It protects people and businesses from events that could cause serious financial harm, such as illness, accidents, theft, fire or legal claims. Understanding the basics helps you choose cover that fits your needs.
Common types of insurance
Health insurance covers medical costs, life insurance provides money to dependants, home insurance protects property and contents, and motor insurance covers vehicles and liability. Travel, business, pet and professional liability policies handle other risks. Some types are legally required, such as basic motor cover in many countries.
Key terms to understand
- Premium is the price you pay for cover.
- Excess or deductible is the amount you pay before the insurer pays.
- Sum insured is the maximum the insurer will pay.
- Exclusions are situations not covered.
- A claim is a request for payment after a loss.
Read the policy wording carefully, especially exclusions and limits.
Choosing the right policy
Assess what you need to protect and the loss you could not afford. Compare quotes from several insurers and brokers, check financial strength and customer service reviews, and look at what is included rather than only the price. Avoid being underinsured or paying for cover you do not need.
Making a claim
Report the incident promptly, keep evidence such as photographs and receipts, and follow the insurer’s process. Be honest, because false information can invalidate a claim. If a claim is rejected, ask for the reasons in writing and use the complaints procedure.
Ways to lower premiums
Raise your excess if you can afford it, bundle policies, improve security, maintain a good record and review cover annually. Pay attention to renewal increases and compare before renewing.
Fraud and scams
Beware of unsolicited offers and demands for upfront payments. Check that insurers and agents are authorised by the regulator.
Frequently asked questions
Do I need life insurance?
It may be important if others depend on your income.
Is the cheapest policy best?
Not always. Compare cover, limits and service.
Can insurers refuse to pay?
Yes, if the loss is excluded or information was inaccurate.
Reviewing cover regularly
Life changes such as marriage, new children, a move, a new vehicle or starting a business often require updates to your policies. Set a yearly reminder to check the sum insured, beneficiaries and excess, and compare the market before renewal. Keep policy documents together and tell family where to find them.
Working with brokers and agents
A broker can compare several insurers and explain complex terms. Ask how they are paid, whether they are licensed and which insurers they use. Make sure you understand the policy before signing and keep copies of all correspondence.
Business and professional insurance
Companies may need property, liability, cyber and employee cover. Professionals often require indemnity insurance. Assess risks, review contracts and ask which events your policy covers.
Understanding waiting periods
Some policies exclude certain claims for an initial time, so check the terms.