Insurance involves paying a premium to an insurance company in exchange for a promise (policy) to pay a larger sum if a specific bad event occurs. For example, if you have car insurance and are involved in an accident, the insurer may cover the costs to repair your vehicle based on the terms of the policy.

Types of Insurance:

  • Home insurance
  • Life insurance
  • Travel insurance
  • Mobile phone insurance
  • Car insurance (including third-party car insurance, which is legally required)
  • Building insurance (mandatory for those with a mortgage)

Purpose of Insurance:

Insurance protects you against financial loss by transferring risk. Without insurance, you might have to pay large sums out-of-pocket if something goes wrong.