The majority of people get insurance because:

• The law says they have to (for example, car insurance)
• They are concerned that an event might occur where they could not afford the consequences of (such as contents insurance)
• They are worried that an event may occur that their friends and relatives could not bear the burden of (such as life insurance)

Sometimes, others provide useful insurance. Your company may provide you with health insurance, for example. An endowment policy usually comes with life insurance.

Aside from these aspects, you will have to pay a fee to cover yourself against unpredictable risk. In theory, you can assure yourself for any amount, and against just about any event, that you like. An insurer will, however, assess the risk of you making a claim. Insurers use actuarial tables to work out what they think the risk of you claiming is, and adjust the fee, called the ‘premium’ accordingly.

Insurers will usually want to know quite a lot about you, in order to accurately assess the risk. This is why taking out an insurance policy has historically involved a lot of paperwork. These days, however, the process is much simpler, and you can often take out a policy entirely over the phone, or even over the Internet (though you will usually have to sign something at some point).

Be advised that anybody can set himself or herself up as a general insurance advisor. Most have agreed to abide by the system of regulation operated by the General Insurance Standards Council (GISC). The Financial Services Authority makes sure that any insurers are sound and trustworthy. In the unlikely event that an insurer cannot cover its commitments (usually because it goes out of business) you might be able to claim compensation via the Financial Services Compensation Scheme (FSCS).

To find out more about any given type of insurance, visit an insurance broker or advisor. Some of the more common forms of insurance are:

Life Insurance

Your dependants receive a pre-agreed fee if you die. Sometimes the money is earmarked for specific use, such as paying off your mortgage.

Income Protection Insurance

Covers some part of your income if you cannot work due to incapacity or long-term illness. This type of insurance will usually only come into effect after you have been out of work for a given period, and will not normally cover all your previous income.

Accident, Sickness And Unemployment (ASU) Insurance

This is similar to Income Protection, but usually only covers you for a short time (a year, for example) if you are not working for health reasons or redundancy.

Mortgage Payment Protection Insurance (MPPI)

ASU that covers your mortgage payments if you are unable to work. This type of insurance usually only pays out for a given period of time.

Private Medical Insurance

Covers your medical bills in the event of illness if you choose to seek private health care. Usually only covers ‘essential’ healthcare, and would not normally cover cosmetic or other elective treatment.

Contents Insurance

This will cover the cost of replacing your household goods should they be damaged or stolen. You should take great care to be aware of exactly what you are covered for. Most contents insurance requires that you cover a given amount of the claim yourself (for example, the first 200 pounds).

Motor Insurance

Depending on the type, this insurance covers you for damage while motoring. If you have ‘3rd Party, Fire And Theft’ it will cover you for any damage you do to somebody else’s vehicle, as well as for any costs to you should they successfully sue you. You are also covered if your car is stolen or set fire to. ‘Fully Comprehensive’ insurance will additionally cover you for damage to your vehicle in an accident, if liability cannot be proved against the other party, or no other party is involved (such as if you crash into a lamp-post). Fully Comprehensive insurance will generally cost more, as it covers you for more events, and represents a greater risk to the insurer.

Travel Insurance

Covers you if you have to unexpectedly cancel a holiday, or suffer some loss while on holiday. You are generally covered for medical costs, theft or damage. You should check carefully to make sure you know what you are covered for.