"Insurance" is a word we use so often that we don't ever stop to ask what it means!
With insurance
, you basically protect
yourself against risk
.
When you insure
something, you ensure
that you won't suffer a big loss if anything happens to that thing!
With insurance, you basically protect yourself against risk. Let's say you buy a new car for R100 000. Now you are at risk. What will you lose if it is stolen or written off in an accident? R100 000! But what if you start protecting yourself against that risk by saving R500 a month? Well ... it will help a bit! After 12 months, for instance, you will have saved R6 000. But R6 000 doesn't help much when you've lost R100 000. No, there is a better way: insurance
.
Imagine someone comes to you and says, "Give me R500 per month, and I'll take over the risk of your car right from day one! In other words, if your car is stolen, I will pay you what it is worth! If you have an accident, I will have it repaired!" It sounds too good to be true, but this is exactly what insurance companies do! They have thousands of clients, each paying a monthly premium. If you lose your car, even within the first day of buying it, your insurance company will pay you if the conditions of the policy apply! This is the basis of all
insurance, both long-term and short-term.
Short-term insurance
Short-term is insurance that you take out on possessions such as your house or your car or your camera - any insurance policy that you can cancel either when you dispose of the insured article or no longer wish to insure it. It can also cover you for legal liability to others.
Long-term insurance
Long-term insurance includes life insurance and retirement annuities. It is insurance that you would usually expect to pay over a very long period of time - until you die or the policy matures (for example at a specified age).
When you decide to buy insurance, it is important to first look at your insurance needs
. Once you have worked out your priorities
, you are in a position to find the products that suit you best. If you have a family, your priorities will probably be different to those of someone who is single. You can take out insurance on almost anything - but your choice will depend on your needs
and what you can afford
. You can do this through an intermediary or a direct insurer.
It is important to understand the terms and conditions of all your insurance policies, and to be honest when filling in application forms or making claims.
Don't make false statements. Don't be embarrassed to ask questions - you have a right to know!