MONEY MATTERS
LIGHTENING THE LOAD, SPREADING THE RISK Safeguarding against things that might happen in life is an unfortunate necessity most people need to be prepared for, as Peter d’Aguilar explains
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othing in life is totally risk free, including life itself – so we all need a degree of security and protection from unforeseen setbacks. In one form or another, insurance has always been around. Early humans hunted dangerous prey in groups, to spread the risk. Valuable goods were transported in several different cargo ships, reducing the chances of losing everything at sea through shipwreck or piracy. In more modern times, the insurance risk is passed from the individual to an institution that has the resources to cover a substantial loss.
The dictionary definition of insurance is an arrangement by which a company or the state undertakes to provide a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium – providing protection against a possible eventuality. In a nutshell, insurance is a mechanism to mitigate risk by spreading it among a group of participants – so that no one is left to carry the burden single-handed. In an ideal world we would never need insurance. Nevertheless, it is reassuring to know we are covered
against a variety of potential risks. Insurance comes in many forms to cover the different elements in our lives – from our home and its contents, possessions, cars, health, life, pets and travel to income protection, public liability, professional indemnity and long-term care. Its protection or coverage can be for a limited period or throughout a whole lifetime. Insurance works on the principle of the policy holder paying a regular, relatively small premium to the insurer in case they should suffer a loss or a claim against them. If this should unfortunately occur, the insurer then pays out a potentially much larger sum by way of compensation. The insurance policy is the contract between the insurer and the insured, setting out everything the policy covers and any conditions and exemptions. In order to keep premiums down and avoid too many small claims many policies include an excess, which is the amount of your claim you agree to cover before
A good insurer can turn a difficult situation into a more bearable one
June 2021 | SUSSEX LIVING 63
