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Insurance is a product designed to protect you against financial loss in the event that something unexpected happens. It is common place for people to ensure items and belongings that are of a high value, either in terms of their financial or sentimental importance to a person.

Common insurance products include life insurance, income protection insurance, pet insurance, car insurance, phone insurance and travel insurance. While some insurance products are designed to be priced depending on the insured’s personal circumstances, others are based solely on the actual item being insured.

Do you need insurance?
This depends greatly on your personal circumstances in some cases, and in others on certain rules and regulations. For example, it is illegal to drive a car on a public road without the correct insurance in place to cover the driver. On the other hand it is simply advisable that when you go on an international holiday, you purchase the correct travel insurance to cover you against injury or sickness while you are abroad.

One thing you always need to consider when purchasing insurance is whether or not it provides you with what you really need from it. There is no point purchasing insurance cover that either doesn’t provide you with a high enough level of cover, and is therefore virtually useless, or provides you with too much cover, and means you are overpaying for a service you are you are not likely to need.

How do you pay for insurance?
This, again, depends mostly on the policy holder. Some insurance policies will offer the chance to pay for a policy for a certain period, either in a lump sum, or in monthly instalments. Paying for the policy in a lump sum usually works out cheaper, as interest is added to premiums which are not paid up front. For insurance policies that don’t offer the chance to pay a one-off fee, there will not be interest added to instalments.

It is important to consider also that financial insurance plans, such as life insurance and income protection which allow you to choose your level of cover, will have fees that reflect the cover you have chosen. For example, a person who asks for £3000 per month in income protection will be paying higher monthly instalments than someone who asks for £2000.

Different insurance policies will also vary in their reaction to missed payments. It is necessary to look at the terms and conditions in order to avoid costly charges if you default on a payment, or have accidently ordered a product that does not provide you with the correct amount of cover.

Paying an excess on an insurance policy is also a good way to bring your premiums down. An excess is an amount that, in the event of a claim, you will have to pay to your provider. This means that there is risk involved (you could end up paying more than you have saved in cheaper premiums in the event of a claim), but if you keep your excess to a sensible amount, there is a trade-off which should mean whatever happens you don’t lose out badly.

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