Insurance is often a very touchy subject, depending on who you speak to. There are always misconceptions about insurance products and insurance companies. At the end of the day, insurance has a purpose to serve. In my view, it is a very important financial and estate planning tool.
First things first
What is insurance? You can think of insurance as a tool that protects you from financial loss. In exchange for that protection, you pay money (a premium) to the insurer. It is a simple as that.
Some of the different types of insurance are:
Short term insurance
This type of insurance covers material possessions such as home contents, vehicles, jewellery and cell phones. This type of cover comes in handy in cases such as vehicle accidents, theft and damage to property. Always consider taking out short term insurance cover to avoid having to pay for these types of events from your own pocket.
Long term insurance
Long term insurance covers a person in the case of life-changing events, such as death, disability or critical illness. Examples of critical illnesses include heart attacks, strokes and cancer. Long term insurance protects your family from the financial burden arising from such events. It also helps to maintain your financial independence if you are not able to work.
This type of insurance covers medical expenses. It is often referred to as medical aid. In addition to medical aid, you can also make use of gap cover products. These products cater to the expenses that your medical aid would not normally pay for. In this day and age, medical aid cover is an absolute necessity. However, the challenge with it is that it is often too expensive for most people. It is a simple example of how demand for a product drives up the price of the product that is in demand.
Insurance is a vast industry and these are just some of the available options. When shopping for insurance, always compare the benefits and the terms and conditions before taking out any insurance. Do not let low premiums fool you into believing that you are getting the best deal. Sometimes paying a little bit more might get you a lot more benefit in the long run.
In the world that we live in, insurance is becoming more of a necessity than it may have ever been.
Always speak to a professional before buying any insurance products.
You might also be interested in How to prepare for financial emergencies.