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Different Types of Insurance

There are lots of types of insurance. But you have to decide which you consider vital and which you might happily do without. It's slightly more interesting than it sounds.

For me personally, nothing is more sleep-inducing than thinking about insurance, with the possible exception of sitting through the movie of the third part of The Lord of the Rings (a contrary view I realise, but deeply felt nonetheless - and I did indeed fall asleep).

OK, I know this isn't easy but please try and pay attention. It's a fact that the subject of insurance doesn't really stir the passions - until, that is, the day that you need to make a claim. At this point, your insurance policy transforms itself from shameful rip-off to bargain of the century.

And there's the paradox of insurance. We almost certainly won't need to make a claim on our insurances. but we just might, and if we do, the financial benefits can become significant. For that reason, we can be tempted into enduring a small loss each month - in the form of the premium we pay - either to prevent the possibility of suffering a larger, unanticipated loss some time in the future, or to secure some financial help if life deals us a blow (exclusions apply).

Because bad things just might happen to us, nobody can say unequivocally that a particular type of insurance is a bad deal. It's a fact though that we do tend to overestimate the statistical likelihood of things going wrong for us personally.

But, of course, for some people, statistical probabilities are not really the issue. 'Peace of mind' can be enough.

TYPES OF INSURANCE:

LIFE ASSURANCE: two main types:

Term assurance . Insurance against the possibility of dying during the period covered by the policy, typically 10-30 years. Various types available: level term (premiums and level of cover stay the same throughout period covered by the policy); decreasing term (premiums stay the same but level of cover goes down over the period of the policy - often used in conjunction with a repayment mortgage); convertible term (policy with option to convert into whole of life policy)
Whole of life. This policy pays out the sum insured whenever you die, but premiums are payable for the whole of your life.

HEALTH INSURANCE: three main types:

Private medical. Offers private medical treatment beyond that supplied by the state health system.
Critical illness. Offers help with medical costs and loss of income if you fall ill with one of a number of specified illnesses (cancer, heart disease, stroke, etc.) Be warned though, if your illness isn't on the list, the policy won't pay out.
Permanent health (aka income protection or long-term disability). Pays out when you're too ill to go to work.

CAR INSURANCE: three main types:

Third party. Bare minimum cover. You cause an accident and the other party are reimbursed but you don't get anything yourself.
Third party, fire and theft. Same as third party but also covers fire and theft damage to your vehicle.
Comprehensive. Belt and braces version. Pays cost of repairs to other party's car if you're to blame, as well as cost of repairs to your car regardless of who was to blame.


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