Insurance: protecting against large losses

Novice level

Insurance is worth considering for losses that would be large, unlikely and hard for you to absorb: serious illness, death of an earner, loss of a home, a vehicle accident.

You pay a regular premium. If the insured event happens, the insurer pays according to the policy.

Read what is covered, what is not (exclusions), and what you pay first (the deductible or excess). The cheapest policy is not always the best one.

Basic level

Term life insurance pays a sum if the insured dies during the term and has no savings value. It is meant for people whose income supports others.

Health insurance covers medical costs up to a limit. Check waiting periods, sub-limits, room-rent caps and claim procedures.

To estimate a life-cover gap, add the money your dependants would need over the years they rely on you, then subtract what they would already have.

Mixing insurance and investing in one product makes both harder to judge. Compare the cost of each part separately.

Advanced level

Compare policies on total expected cost, claim conditions and insurer financial strength, not premium alone. Check portability and renewal terms for health cover.

Expert level

Adverse selection and moral hazard shape pricing and exclusions. Self-insuring small risks and insuring large ones is usually cheaper over time.

Professional level

Advice on insurance products is a regulated activity in many places. Disclosure of material facts when applying is a legal duty: omissions can void a claim.