INSURANCE

Insurance is protection against something that might happen such as theft, fire or a car accident. Assurance is protection against something that will happen such as retirement and death. Insurable risk is something that can be insured against such as fire or theft whereas a non-insurable risk is something that cannot be insured against such as war, a hurricane or an earthquake.

Life assurance

Whole life assurance: The assured pays premiums for the rest of his/her life. When the assured dies a lump sum is paid to his/her dependants.

Endowment policy: The assured pays premiums up to a certain age. The lump sum is paid on the assured reaching this age or on death of the assured, whichever comes first.

Term assurance: This policy is taken out for a specific period of time. If the person dies within that time his dependents will receive the lump sum. If the assured lives past the term no payment is made. This type of policy is often used as security for a term loan. Mortgage protection policy: This policy is taken out by all mortgage holders. If the mortgage holder dies before the mortgage is paid the policy will clear the mortgage and the house becomes the property of the mortgage holder’s dependants.

Motor insurance

Car insurance is compulsory. You will get five penalty points if you do not have insurance while driving.

Third party insurance covers damage to others, their medical bills and damage to their property that arises as a result of an accident for which the insured is responsible. It does not cover damage to you. Third party, fire and theft insurance covers third party claims and also damage to your vehicle as a result of a fire or loss of your vehicle as a result of theft.

Comprehensive insurance is more expensive as it covers more risks. As well as third parties and their property, fire and theft, it covers damage to the policy holder’s own vehicle and also the policy holder’s medical expenses which may arise as a result of an accident.

Home insurance

When insuring your home you need to make sure that you insure it for the correct value and that the contents are insured also.