An insurance is an arrangement put in place to protect you from financial loss.
The Association of British Insurers (ABI) explains that insurance protects you against the risk of loss, damage or theft, in return for the monthly amount you pay (which are called ‘premiums’) and on the understanding that the insurance will pay you compensation for that loss.
But how does insurance provide you financial protection?
In return for the premiums you pay to the insurance company, you are assured of receiving compensation under circumstances and to the amount detailed in your insurance policy.
Most people do not think about insurance and risk coverage until they start renting (renter's insurance), buy a car (car insurance), pay into a group insurance at work (life, disability and critical health insurance), buy a home (home insurance), start a family (life insurance) or planning a wedding (wedding insurance).
We all need some form of insurance.
There are well over a 100 different types of insurance out there. The risk of practically anything that may lead to your suffering financial loss through some unexpected or accidental event may be insured.
Insurance is all about the risk of one of those events occurring.
The following though are the common types of insurance and situations where you may need them.
Jason was 31 years old. He moved to London with his wife and 2 year old daughter for postgraduate studies from another country.
As he completed his master's degree, his wife became unwell suddenly and died.
He had a life insurance policy in place for himself, and not for his wife, reasoning that since he is the main breadwinner, his wife does not require coverage.
He had to stop working to look after their 2 year old. Mourning the death of his beloved wife was bad enough, but now he also had to contend with no income. He had to live at the mercy of friends for over 6 months before he could start working again.
Life insurance is a form of insurance taken to pay out money to the surviving family members or estate of the life insured.
Be sure to have your spouse take out a life insurance too. This can be separately or as a joint life coverage, where you pay a lesser premium in most cases and the first of the two of you who survives gets a payout.
If Jason above had included his wife in his insurance policy, he would have had a payout. While absolutely nothing can replace the death of a dearly loved partner, not needing to worry about finances and cost of living after a loved one passes away help to cushion the pain of loss.
A health insurance is an insurance policy taken to cover cost of you seeing:
Health insurance could also pay out for the inconvenience of staying in ER hospital bed overnight or the cost of ambulance services or transportation to a health facility. And more.
Unless you live in The UK, Canada and a handful of other countries where there are publicly paid for healthcare system, owning a health insurance is very important.
Even in countries described above, having a private health insurance is often still important to cater for expensive procedures and medicines.
A critical illness insurance is a type of insurance taken to cover financial loss if you are unable to work because you are diagnosed with a serious illness.
As Sun Life Insurance Company puts it, "When a critical illness strikes, the last thing you want to worry about is money".
A critical illness insurance typically list 15 to 30 illnesses if diagnosed with during the term of the insurance coverage, will trigger a pay out.
Sun Life Insurance lists 26 illnesses and they include:
We would all love to think that it is not going to be us. But the chances of anyone of us having one of the above condition before the common retirement age of 65 is moderate to high.
A disability insurance is an insurance policy taken to pay a percentage of your monthly income, if you are unable to work due to a disability.
Many of use would think that could never happen to us. The statistics shows that at this moment, 18% of Americans are disabled and most of these persons are within the working age.
Another statistics have it that about 30 out of every 100 Americans getting into the workforce would become disabled before they reach retirement age.
A disability insurance is certainly one of the very important types of insurance policies to have if you are employed or self employed.
There are largely two types of disability insurance:
Common causes of disability that triggers a payout include:
Many disability insurance policies would define disability based on whether you can do any job at all or your own occupation.
They also may define disability based on how it impacts one or more of the following:
Of course, no one of use should wait to be in a bad situation before getting a disability insurance. It pays out to you until you are able to return to work or until retirement.
For most of us, our home would be the most expensive single purchase we have.
How much does your house cost? $90,000 or $9,000,000?
Bad things happen. It can, to anyone at anytime. Suppose your house is hit by a falling tree or gets flooded and damages the building and content? You don't live in a flood plain you said? What about fire? Any house could get burnt down.
That is where a house insurance comes in.
A home insurance is an insurance policy taken to provide protection to your home against some potentially damage or risks, such as fire, flooding, storm, water leaks, impacts (from aircraft, vehicles, drones, falling trees and the like)
Owning a property or home insurance is highly recommended whether you are a tenant (tenant's home insurance policy), have a mortgage on a property or even if you have completely paid for your home.
A car insurance, also referred to as auto insurance in North America is a legally required insurance in most countries, if you have a car or automobile.
After a house, your car is perhaps the next most expensive single personal item you own. With over 165,000 car accidents in the UK every year (160,000 in Canada and over 6 million in the USA), it is easy to see why you need a car insurance.
Popular types of insurance for cars include:
Car insurance premium price is highest for new drivers. Your previous accident-free driving record and sex (men tends to pay higher premiums than women), would determine your premium rate.
The make, model, age and value of the vehicle and the use to which it is put (for business or for social, domestic and pleasure purposes, for example) would also influence your premium.
Car insurance, just like other types of insurance could set you back by a few hundred dollars a month, but they are worth the peace of mind they bring.
Travel insurance is another type of popular insurance policy worth having if you travel even within your country, but certainly if traveling outside your country.
A travel insurance covers your financial risk if you were to:
Depending on the level of coverage you purchased, things like overseas ambulance service and air evacuation in case of serious illness, hospitalizations, prescription drugs are all included in travel insurance.
The UK government advice is that anyone travelling abroad is urged to arrange travel insurance.
One Australian website puts it, “if you can’t afford travel insurance, you can’t afford to travel”. Does that not underscore the importance of travel insurance?
Sports insurance is an insurance many of use may not have even thought of.
It is an insurance policy taken to cover you against financial risks that may arise due to your participation in sports, coaching or provide a venue for sporting activities or training.
A sports insurance therefore could cover the following scenarios:
Clearly, sport insurance is not just for those participating in sports as players, but it is also for sporting coach, gym owners, personal trainers and instructors, training studios and more.
Sport insurance may also pay for a membership fee reclaim, if you paid for an annual membership but due to illness, you are unable to continue to attend.
Pet insurance is insurance taken to protect yourself from financial loss from providing veterinary care to your pet as well as injuries to yourself or others arising from your pet.
Pet insurance could also cover for cost of cremating your pet etc.
The cost of vet care for pets is on the rise. If you have a beloved fur friend, get a pet insurance if you can afford it to prepare for those times things would not go well for your pet.
A wedding insurance is an insurance taken to protect yourself from financial loss as a result of events out of your control during a wedding.
If for example, you have perfected the plans for your big day, spent all those time and preparations, rentals etc and then you get to the wedding venue and it is closed or not available for any reason, with a wedding insurance, you could put in a claim for the loss incurred.
Other risks a wedding insurance covers include:
For only a few hundred dollars in insurance premium for a wedding insurance, you could get coverage of up to $2,000, 000. Why not include a wedding insurance cost in your wedding budget and enjoy the peace of mind that comes with knowing that should anything happen out of your control during your big day, you are covered.
Business insurance covers your risks arising from running your business.
A business insurance typically covers the following:
A business insurance often also include a Worker's Compensation Board (WCB) insurance.