The purpose of insurance and life assurance is to protect against risks attached to future events. The articles in this series will help you identify different types of insurance products to suit your needs. In the case of life assurance, payment will be made so long as you keep up with your instalments. Many life assurance schemes in the past lacked transparency, and had high up front charges and commissions. Responding to consumer pressure, insurance companies have introduced new products that spread out commissions and charges previously frontloaded in the form of Personal Investment Plans and Personal Equity Plans, both of which are described in some detail later in this series.
Insurance is concerned with potential risks.
Typically a group of people who face a common risk pool that risk so that everyone in the pool pays for, or shares the loss incurred by a few members of the pool. Some forms of insurance are mandatory under law such as car insurance. Some insurance is required under contract. When purchasing property there is a requirement to obtain life assurance, property insurance, and in some cases an indemnity bond. Assume, for example, that 100,000 people insure their homes with the same insurance company and each house is worth 200,000.