Insurance doesn’t remove the risk of accident, illness, injury, or disaster, but it does provide
protection, compensation, and financial security to you and your family.
General insurance products protect you so you can replace those assets you have accumulated.
General insurance also helps you manage those unexpected events that may otherwise mean you
have to dive into your savings or find other ways to make ends meet.
It doesn’t matter whether you have a low or high income, insurance is a way to avoid the risk
of losing your assets or finding yourself in financial difficulty.
What is insurance?
Insurance involves the transfer of risk. By paying premiums to an insurer, you transfer the
risk of loss from yourself to the insurer.
The insurance process is a mechanism for spreading risks or sharing losses of the few among
the many. Individuals (policyholders) pay a fee (the premium) to an insurance company (insurer)
in return for a benefit in the event of a loss that might occur as a result of certain agreed
events (a claim).
The terms and conditions are set out in the 'insurance contract' (policy document).
It is important to understand that risk insurance is not a savings product. Insurance
involves the payment of the premium in exchange for cover. You will only receive a benefit if
you have a legitimate claim for a loss that is specified in your policy document.
What is risk?
A risk is the chance of an event resulting in financial loss - for example, something valuable
getting stolen, damaged, destroyed or lost.
The risks that you will face are not exactly the same as those faced by others. Risks grow out
of your particular situation, such as your savings and income, your assets, or your age. Your
risks will also change as your circumstances change, such as you get a loan to buy a car, a
property, or other assets.
What is a premium?
A premium is an amount of money you pay an insurer for insurance cover. The premium you pay is
the financial value of the risk being transferred from you to the insurer.
The amount of premium you pay depends on many factors, including:
- the type of insurance cover
- the level of risk that you are looking to insure
- for some types of insurance, the level of excess you take
- your personal information
- your age
- administration costs and taxes and levies.
Generally, the higher the risk of loss, theft or damage, the higher the premium you will pay.
What is an excess?
An excess is the amount of the loss you must pay before the insurer
begins to compensate you. Many types of general insurance may include an excess. Some
insurers make an excess compulsory, while others will allow you to use excess to reduce
the premium. An excess can act as a deterrent against frivolous claims and so keeps the cost
of premiums down for most customers.
Generally, the higher the excess, the lower the premium.
What is a benefit?
A benefit is when you receive an amount of money, or in the case of some insurance,
replacement or repair of your belongings from the insurer because an event covered in
your insurance policy has taken place.
What is a claim?
A claim is when you contact your insurer seeking a benefit for an event covered by your
insurance policy. For example, there is a fire in your home and you have home contents
insurance and you make a claim to replace your furniture and other personal possessions.