What is insurance? –
Introduction 👋
There are lots of different emergencies that could happen, which could make you lose a lot of money. 😱
Things like:
- Getting robbed 🦹♂️
- You or your family getting ill 🤒
- Natural disasters e.g. flooding 💦
- Your belongings breaking 🩹
- People passing away 🥀
- Your home getting damaged 🏘️
- Cars breaking down 🚗
- Holidays cancelling✈️
can have a huge impact on your money.
So how do you protect yourself from all of these financial struggles?
Today we’re explaining what insurance is for!
Disclaimer: This website provides information for guidance and educational purposes only. The Grown-Up School does not provide regulated financial advice. You can seek independent financial advice from a suitably qualified and regulated professional advisor. Check out our disclaimer policy for more information.
What is insurance? 🚑
Getting insurance is where you pay money to “protect yourself” from different emergencies.
If you find yourself in the emergency, you can be given emergency money to help you.
Types of insurance ☔
There are lots of different situations you can get insurance for – here are some of the most common!
1. Mobile Phone Insurance📱
Mobile phone insurance can cover the cost of repairing or replacing your phone if something happens like:
- You lose your phone 🤷♀️
- Your phone gets damaged 🔨
- Someone steals your phone 🦹♀️
2. Home Insurance 🏡
Buildings Insurance 🏚️
Buildings insurance can cover the cost of repairing damage to the structure of your home (e.g. walls, windows, roofs).
It can also cover things like:
- Fences
- Garages
- Sheds
- Pipes
- Cables
- Drains
- Rebuilding your house if it is destroyed
Your home might be damaged by things like:
- someone crashing a vehicle into your home 🚗
- things falling on your house e.g. trees or lampposts 🌲
- someone breaking into your house or vandalizing it 🦹♂️
- fires 🔥
- explosions 💥
- storms ⛈️
- floods 💦
- earthquakes 🌎
- the ground sinking under your home (subsidence) ⬇️
- frozen and burst pipes ❄️
If you’re renting a home, very often your landlord will pay to protect the building.
It’s important to check that this cover is in place when you rent! (How to rent a home: a step-by-step guide 🔑)
Contents Insurance 🛋️
Contents insurance can cover the cost of repairing or replacing your personal/home possessions when you experience things like:
- fire 🔥
- theft 🦹♂️
- storms ⛈️
- flooding 💦
It can also cover you if you take your belongings out of the home e.g. on holiday.
You might have to pay extra to cover you when you accidentally lose or damage your possessions. 🤔
3. Car/vehicle Insurance 🚗
Car/vehicle insurance can cover the costs of problems with your vehicle.
There are 3 main types of car/vehicle insurance:
1. Third party 🥉
This insurance covers you for :
- damage to someone else’s vehicle 🚗
- damage to someone else’s belongings
- injury to someone else in an accident 🤕
In the UK there is a legal requirement to have at least “third party” insurance. Third party insurance doesn’t cover repairs to your vehicle. 🛠️
2. Third party, fire, and theft 🥉🔥🦹♂️
This insurance gives you “third party” cover, but also covers:
- damaging/losing your vehicle from fires 🔥
- damaging/losing your vehicle from theft 🦹♂️
3. Comprehensive cover
This insurance gives you “Third party, fire, and theft” cover, and repairs to your own car. 🛠️
It might also cover you for things like:
- cover for legal/medical costs e.g. if someone injures you whilst driving and you take them to court 👩⚖️
- belongings that get stolen from your vehicle 🦹♂️
- hiring a replacement vehicle when your vehicle has been involved in an accident 🚗
- injury/death for you or a family member in a vehicle accident 🤕
- repairing/replacing cracked windscreens 🪟
- getting help if your vehicle breaks down (“break down cover”) 🛠️
Sometimes these cost extra so make sure to check what’s included when you get your insurance! 🕵️♀️
4. Pet Insurance 🐶
Pet insurance can cover the cost of vet treatment if your pet gets injured or becomes ill. 😿
You might also be able to get paid from pet insurance if your pet:
- dies 🥀
- gets stolen 🦹♂️
- becomes lost 🔍
- harms someone 🤕
- damages someone’s belongings 🛋️
5. Income Protection Insurance 💸
Income protection insurance is also sometimes called “permanent health insurance”.
It can help make sure that you receive regular income (money) if you can’t work because you’ve gotten sick or become disabled. ♿
It can give you regular payments until you return to work or you stop working when you get old (retirement). 🧓
6. Life Insurance 🥀
Life insurance pays money to your loved ones if you die. 👪
This could help them to pay for things like your funeral costs, bills, and debt payments.
7. Critical Illness Cover 🤒
Critical illness insurance can pay you money if you become ill from one of the medical conditions listed in the “insurance policy”. e.g. having a stroke or getting cancer
This can help you to pay for things like bills and your family after you become ill.
8. Travel Insurance ✈️
Travel insurance can help to cover you from problems on holiday like:
- losing your belongings 🤷♀️
- damage to your belongings 🕶️
- missing your transport or having it delayed 🚌
- getting your belongings stolen 🦹♂️
- needing medical treatment or having a health emergency 🚑
- you accidentally damaging someone’s belongings or injuring someone 🩹
- dying on holiday 🥀
- cancelling your trip or cutting it short unexpectedly 📆
How insurance works ⚙️
“Claims” 🙋♀️
To receive the emergency money from your insurance, you usually have to put forward a “claim” to request the money.
This usually involves either calling the insurance company to log a claim, or filling in a few forms. ✍️
For example, if your £500 phone breaks and you have phone insurance, you could put forward a claim to receive £500. 📱
“Excess”💰
To make your insurance payments cheaper, you can agree to pay a thing called “excess”.
Excess is where you agree to pay a chunk of money towards any insurance claims that might happen. 💷
For example, if your £500 phone breaks, you could agree to pay £50 towards a new phone, and the insurance would pay £450. In return, your insurance payments could be lower. 📱
Conclusion 👍
So that’s it!
Insurance is where you pay money to “protect yourself” from different emergencies. 🚑
If you find yourself in the emergency, you can be given emergency money to help you.
There are lots of different types of insurance, to cover all sorts of emergencies.
If you know any friends or family members who might benefit from learning about insurance, share this post with them!
Finally, don’t forget to check out our similar articles below!
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