We can’t predict what will happen in life, but we can try to reduce the risks. Insurance helps protect you from the risk of financial loss if your possessions are stolen, or you pass on leaving your family without an income, or if there is a funeral to be paid for.
How does insurance work?
You pay a monthly premium to insure against a particular event, such as a loss, theft or death. If that event occurs, you make a claim, and the insurance company pays a specified amount of money. Most insurance policies cover the risk of loss only and have no investment component. So, if your policy is cancelled, you don’t get a pay-out and your premiums won’t be refunded.
Different kinds of insurance
Short-term insurance: You insure your possessions such as your home, car and cell phone.
Examples of Long-term insurance:
Life insurance: You insure your life for an amount. If you die, your beneficiaries, usually your family, are paid that amount of money, which they can use to pay living expenses and school fees etc.
Funeral cover: You insure your life, and the lives of specific family members, for an amount that pays out when you or they pass on. This amount is used to pay for a funeral.
What does it cost?
The premium depends on what you insure, for how much and your risk. A high risk means a higher premium. Living in a high crime area is a risk for short-term insurance, having an illness such as uncontrolled diabetes is a risk for a life insurance policy.
