Financial Goal Guide

Attain Your Financial Goal

How Does Insurance Work?

Insurance is primarily a way of protection against financial loss. It’s a form of proactive security, primarily employed to mitigate the risk of an uncertain or contingent future expenditure. Like all forms of protective investment, insurance is about controlling the risks you face so you can live your life without too much worry and stress.

In this competitive world, life insurance is a must for every person and family. Life insurance is designed to cover your dependents in the event of your death. The insurer pays the named beneficiary a specified amount, known as the policy limit. The maximum amount that can be paid out by the insurer is usually based on your age, whether you are married or not, and whether you smoke or not.

This may sound easy, but the truth is that it does take a lot of planning to set up a good scheme that will ensure your family has sufficient financial resources in case of your untimely death. You need to make sure that you are able to pay regular premiums, as well as being insured against unpleasant events that might occur. There are various factors that influence the premiums you will be asked to pay, including your health and lifestyle, as well as your occupation. If you smoke, you will be asked to pay more in insurance premiums than someone who does not smoke.

Premiums are determined by your age, occupation, health, gender, and whether you are married or not. A younger person would generally pay lower premiums than an older person, as they are less likely to die earlier. Gender will also affect the premium. Men tend to have higher insurance premiums than women. Smoking and alcohol consumption are both known risk factors for premature death, and these factors will also reduce the amount of your premium.

When looking for an affordable home insurance policy, do not fall for any ‘blitz’ techniques – it is important to choose a reputable company with a good track record, and a reliable payment system. You may find it cheaper to take out a third-party policy instead of opting for a comprehensive one. However, this means that you are likely to pay more interest over time, so it is not always the best solution. You may also face a limitation on how much claim you can make.

When taking out third-party insurance policies, you are only covered for the cost of the third-party policy limit. The cost of premiums generally rises with the increase in the policy limit. Therefore, it is advisable to take out a policy that offers a large enough limit. Your insurance policies work in a similar way to life insurances, in that there is an initial level of cover. The insurance policy limit will depend on various factors, including your age, gender, occupation, and whether you smoke or not.