Do I need Insurance?

In some countries certain kinds of insurance are compulsory. In others, most kinds are practically unknown. In addition, the cost of insurance and the type of coverage provided vary widely from country to country. But the basic principle of insurance, covering risk remains the same.

Insurance pays out when something unpredictable causes a loss. The more property a person owns, the more he has to lose. Similarly, the more family responsibility a person has, the greater the impact if he or she dies or becomes physically disabled. Having insurance can alleviate one's concern about the possibility of suffering a loss of property or a disabling accident.

You need insurance whenever:

The law says you must have it. For example, if you drive a car, you must be insured.

An event could happen to you and you would not be able to afford the loss. For example, if a tile fell from your house and injured someone who then claimed thousands of £s for their lost earnings.

If an event happened, people who are dependent on you could not bear the loss. For example, if you died and your children needed the financial support you had previously given.

In some cases, the state provides protection by, for example, paying incapacity benefit if you can't work due to illness, or bereavement benefits to a widowed husband or wife. But state benefits are low and you usually have to pass a number of tests before qualifying for them.

Often a scheme at work provides life insurance, check the cover is enough for your needs. A scheme at work might also provide some health insurance, such as income protection insurance or private medical insurance.

Is it wise to spend money on insurance even though a claim may never be made? Well, is keeping a spare tire in the car a wasted investment, even if the tire is never needed?

The sense of security to the car driver may make the expense of the extra tire worthwhile. While financial compensation cannot make up for certain losses, it may compensate for other losses.