Lesson 1 of 3
Insurance basics
Pay a small amount to avoid a huge loss.
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Insurance lets many people pool small payments (premiums) so the unlucky few are covered for big losses.
The two you hear about most
- Health insurance: pays hospital bills. Medical costs can wipe out years of savings.
- Term life insurance: pays your family if you die during the term. Important once others depend on your income.
Key words
- Sum insured / cover: the maximum the policy pays.
- Premium: what you pay each year.
- Waiting period and exclusions: what is not covered or covered only later.
Insurance is not an investment
Plans that mix insurance with “guaranteed returns” often give low returns and low cover. Many experts suggest keeping insurance and investing separate: buy term + health cover, invest the rest.
Quick quiz
Question 1 of 3The amount you pay every year for insurance is the…