Insurance

What they are

These are products that protect you and your property against financial disasters.

The common types of products are:

Life: This provides a benefit to your beneficiaries after your death.
Personal Accident: These provide you with protection if you get incapacitated because of an accident. More commonly called disability insurance, you get paid when you lose a part of your body.
Health: If you get sick and are hospitalized, this pays for the bill.
Auto: This covers the cost of damaging your or someone's car, someone's property, or injuring someone in a car accident. It also pays when stuff in your car or your car itself is stolen or damaged.
Homeowners: Typically, an insurance against fire or an earthquake destroying your house. But it can also cover for things stolen or damaged inside you house.
Liability: If you get sued for whatever reason, you get protection as this policy pays for the damages.
Travel: Covers you for losses like lost luggage, cancelled flights, and personal accidents.
Credit Life: This is life insurance required of you when you get a loan like a housing or car loan. If you die, the policy pays for the remaining balance of your loan.

What you earn

Primarily, you or your beneficiary receives a certain fixed amount when whatever is covered in your policy takes effect, such as if you have a car accident, if your house burns, or if you die.
Life insurance is also packaged frequently with a savings component, such that you earn a certain amount after a certain number of years.

What they cost

You pay premiums once or a certain period of time.
You get taxed on your premiums but insurance benefits are exempt from tax.
The premium includes of course the cost of the insurance company, to cover its operating expenses and the commission it pays the agent who sold the policy to you, and earn money at the same time.

What's good

They protect you from substantial financial loss because of a disaster. If you just rely on your savings and investments, they may not be enough. Insurance is really about investing against possible disaster.
It saves you some of the hassle, inconvenience, and anxiety that you otherwise would go through if you paid for all the trouble yourself. In many cases, your insurance company will just deal directly with the other party's insurance company. And your insurance company will take care with a lot of the paper work.

What's bad

They can be very expensive especially if you easily give in to pressure and don't do your homework.
Of course, if the disaster you’re insuring against doesn't happen, your premium is money down the drain. But then again, which would you rather happen?
Insurance policies have a lot of restrictions, exclusions, and confusing gobbledygook. You may think you're covered when you're actually not.
If your policy lapses because you fail to pay all your premiums, you get nothing.

Where to get them

Insurance companies, of course, and banks that have bancassurance departments, plus HMOs.

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