What to Know Before Buying an Insurance Policy

Nobody gets excited to buy insurance. We all do it for very different reasons but getting your insurance portfolio sorted is one of the key components of good financial planning. In fact, the best time to put your insurance policies in place is when you’re young and healthy! 

An insurance policy is the insurance company’s promise to pay not just if something bad were to happen but also to provide for your financial security later in life.  The risk may be tangible (such as a car) or intangible (such as life). Making a choice when buying insurance therefore is all about your protection needs, the level of self insurance you can afford in the event of the unforeseeable, and how much you trust the insurer and insurance intermediary. 

You might have an inkling that insurance is supposed to help you when things are bad, like if you fall ill or someone dies. But insurance is first and foremost a financial product that allows you to live your life and perform your activities without worrying about how you’ll cope financially with life’s uncertainties. 

Browsing through the internet and talking to your friends, you’ve probably realised  that you can insurance almost anything or any event. 

The two main types of insurance are general insurance  (travel, car, personal accident, pet, student, etc.) and health and life insurance (life, health, critical illness, ILP, etc.) An insurance intermediary’s role is to advise you of options that suit your personal needs, help you with your insurance application, service you during the period of insurance and at renewal. 

There are three main types of intermediaries:

1. Captive insurance agents are employees of a particular insurance company, therefore they can only sell policies of that insurer.
2. Independent Insurance agents can represent only three companies and sell their policies to you.
3. Insurance brokers are not restricted to three principles, so they can access the entire market and sell multiple insurance companies' policies to you.

All agents and brokers earn a living through commissions paid by the respective insurance company against policy sales. You can choose to buy from a policy the insurer, an agent, or a broker. However, you should make sure that you’re making this choice knowledgeably.