The Insurance Gateway - Introducing Insurance

Introducing Insurance

Introduction
Protecting against the risks associated with every day life is essential to everyone's well-being and peace of mind. Insurance surrounds you in all walks of life, some ways that you may be aware of and others that you may not be:

insuring your home and property against the risk of burglary;
being able to travel on the bus, safe in the knowledge that if the unexpected happens you will be looked after;
preparing for retirement by saving for a pension;
protecting employers and providing reassurance for employees.

Basic principles
Although many types of insurance seem complicated, the basic principles are straightforward. Insurance companies assess the risk of any eventuality and the potential downside associated with it. Then, based on past experience and their own expertise, insurance companies calculate the 'premium' that a customer needs to pay to provide 'cover' against injury or loss. When the insured event happens, the company pays out the agreed level of 'claim'.

Overall, the total premiums must cover the total claims which may need to be paid out. To help ensure that costs are kept as low as possible, and that customers' needs are met, insurance companies also invest in the stock market and elsewhere.

The main types of insurance are:

general insurance;
life and pensions;
health and protection.

General insurance
General insurance plays a vital role in the modern economy. It lets individuals and businesses minimise the impact of unexpected and unwelcome future events, and helps them organise their lives and businesses with greater certainty. The insurance industry pays out £40 million a day in general insurance claims.

Life and Pensions
Life insurers offer valuable financial protection in the event of your early death if members of your family are dependent on your earnings, as well as a variety of ways of saving for the future. The industry pays out £166 million a day in pension and life insurance claims.

Health and protection
The insurance industry offers peace of mind by providing ways of paying for private medical care for curable or short-term illness or injury. It also enables you to plan for old age and to protect your financial assets, but still pay for appropriate levels of care. There is a range of policies designed to provide a monthly income if you are unable to work due to sickness, accident or injury, until you are able to re-join the workforce.

Investment
The insurance industry has £1,000 billion invested in company shares and other assets on behalf of millions of savers in the UK and elsewhere. It accounts for over 20% of investments in the London stock market.