Insurance: How Insurance Works and General Information

Insurance made clear
This website covers all the fine details of insurance and helps citizens to identify the requirements and help them select the best insurance schemes for their requirements.

Why do you need insurance OR Do you really need insurance OR what all things you need insurance for? The unexpected sometimes happens. If your house is burgled, insurance can pay for you to replace the things that were taken by the burglar. If you need medical treatment, health insurance can pay for private healthcare, and replace some of your income if you can't work. If you die, life insurance can pay a lump sum to the family you leave behind.
In this section, we explain the main things you can insure, how it works and things to think about to help you decide whether you need insurance.

What is insurance?
Insurance is a way of protecting yourself and your belongings against a particular adverse event, for example, a burglary, or losing your income because of illness. If this happens, insurance will pay out an agreed amount, or an amount to cover the damage, as appropriate and described in the insurance policy document. Of course, unfortunate events may not happen, but you have to decide whether you're willing or able to take that risk. Some insurance, like motor insurance or car insurance, is compulsory – you have to have it if you drive.

How does Insurance work?
The amount you pay for insurance will be based on the information you give to the insurance company (also termed as the underwriter) and the type of risk you want to insure. Insurance companies use underwriting criteria, for example, where you live, if you smoke or what type of activity you would like to be covered for to help them work out the price (premium) of the insurance. Remember. The more risky situation is, the more costly the insurance becomes. For e.g., if you want to insure your house against earthquake and your house is in earthquake prone region, then you will have to pay more insurance premium. If your house is in a safer area, then the insurance premium amount will come down. Similarly, while taking car insurance, a driver with no accident record will pay less insurance premium, while the one who may have had an accident or two will find the same insurance costly. For health insurance, a smoker will have to shell out more money for insurance as compared to a non-smoker.
You might find that some insurance companies may not be able to give you a price for the cover you need. This could be because that particular insurance company doesn't offer insurance for the type of risk you want to insure (for example things like antiques or vintage cars). If you want this type of insurance you might have to go to a company that specialises in this type of insurance cover.
The insurance company agrees to pay out if the event which you're insuring against happens. For example, your travel insurance policy may pay out for loss of luggage. It is important that you give the insurance company the correct information when buying insurance as incorrect information might affect your claim.
You pay either a sum for the whole year (or sometimes longer), called a single premium, or a regular premium, usually monthly, into the policy. You can choose which company's policy to buy yourself or you can go to an insurance broker, who'll help you choose.
Most insurance lasts for one year at a time and you can renew your policy when it ends, or go somewhere else for a better deal. But make sure you don't lose out by switching and always check that a new policy covers what you need it for. Always compare what's covered by a policy, not just the price. Some might be cheaper than others, but they may not offer the same level of protection.