Some insurance may be compulsory, like car insurance (if you drive) and buildings insurance (if you have a mortgage). Other insurance is voluntary and can protect you and your loved ones against almost any eventuality. While you can't insure against every possible risk, how should you decide what to cover?
A good place to start is to insure the things that you would find it hard, if not impossible, to cover or replace yourself. For example, most people would find it very difficult to replace the main household income if they were unable to work through illness or injury.
Think about what you need and value most in your life. Is it your health? Your home? Your pets? A family heirloom? Research what it would cost to protect them with insurance. Remember that all insurance costs money and so you will need to include these costs, or premiums, in your monthly budget.
It’s also important to factor in any terms and conditions associated with an insurance policy, for example, any excess that would need to be paid in the event of a claim, existing medical conditions that should be declared, as well as any other exclusions.
A healthy approach to protecting you and your family against risk involves two steps:
Take out insurance to cover substantial risks that you would find it hard to recover from if they occurred, like a fire or permanent injury.
Meet smaller, unexpected costs by putting aside a regular, monthly sum into an emergency savings fund.
Comparing insurance policies from different providers isn’t always straightforward. It’s important to compare all the elements that make up an insurance policy, including:
cost of premium
cost of excessive (if applicable)
any terms or conditions imposed
fees or penalties for missing payments
tax or other implications
choice of repairer, hospital or vet when making a claim
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