Insurance

Insurance is a transfer of risk. You pay a premium, usually monthly or annually, and in exchange the insurer agrees to pay you or a named beneficiary if a specified event occurs. The insurer pools premiums from many customers, so the cost of occasional large claims is spread across a large base of regular small payments.

The contract specifies what is covered, what is not, and what you pay if a claim happens. That payment is called a deductible or excess. The insurer's obligation is limited to the amount stated in the policyTermCar insurance×تأمين السياراتA contract that covers the cost of damage to your vehicle or injury to others, depending on the type of policy you hold.Open the term, called the sum insured or coverage limit.

Insurance protects a household against events that would otherwise be financially catastrophic. A serious illness, a car accident, or damage to your home can cost far more than most people have saved. Insurance means that when these events happen, the cost falls on the insurer rather than on you alone.

It also makes certain things possible. A bank will not lend you money to buy a car or a home without insurance on it, because the lender's security depends on the asset surviving. Insurance is often a condition of the loan, not optional.

The trade-off is that you pay a premium whether or not a claim ever happens. The insurer prices this premium based on the probability of a claim and the cost if it occurs. A younger driver pays less for car insurance than an older one because the statistical risk is lower. Someone with a serious pre-existing illness pays more for health insuranceTermHealth insurance×التأمين الصحيA contract where you pay a regular premium and the insurer covers some or all of your medical costs, with coverage varying by policy and provider network.Open the term, or may not be able to buy it at all.

• Insurance only covers what the policy says it covers. Reading the fine print matters: a travel policy may exclude claims that arise from a pre-existing condition, or from travel to certain countries.
• The deductible or excess is what you pay toward a claim before the insurer pays the rest. A higher deductible means a lower premium, because you are taking on more of the risk yourself.
• Insurance is not an investment. It is protection against loss. The premium is not building toward anything; it is the price of the coverage for that period.
• Some types of insurance are mandatory by law or by contract: car insurance is required in most places, and a mortgageTermMortgage×الرهن العقاريA loan secured by property, where the lender holds a claim on the house until the debt is repaid.Open the term lender will require home insurance. Others are optional but common, like health or life insuranceTermLife insurance×التأمين على الحياةA contract where you pay regular premiums and the insurer pays a sum to your named beneficiaries if you die during the coverage period.Open the term.