Insurance is something you pay for that protects you against events which could cause you some loss. For example if you lose or damage your belongings, you can receive money to replace them.
Insurance can be paid for in a one-off payment, or in regular payments.
If you need to make a claim, your insurance company may pay for the full amount, or a part of the full amount, depending on your level of cover.
It is important to check the terms and conditions of your cover.
If you could not afford to replace an essential item if it breaks (eg your washing machine) then it may be worth getting it insured. However, if you have been able to save money “for a rainy day” and you could afford to replace the item, then it may be better to keep putting a small amount into saving for these kind of emergencies instead of paying for insurance.
Insurance provides protection for you (against a specific risk) and can ease anxiety.
Insurance may stop you from having to make a big payment if something goes wrong.
Common types of insurance include:
Home insurance covers damage to your home and contents insurance covers the things you keep in it.
Travel insurance can cover you for lots of different things while you are abroad. For example, it can pay your medical bill if you are ill, or the cost of your luggage if it is lost or damaged.
Life insurance will pay money to your family or loved ones when you die.
Car insurance is something you must have if you drive a car, in case of an accident. It will pay you or the other driver, depending on whose fault the accident was.