What is insurance even for?

Lesson 1 of 13 in our free Insurance guide: a 5-minute money game with the key points below.

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The story so far

Mo: Why would I pay money every month for something that MIGHT happen? That's a subscription to anxiety.
Nana: Because if it DOES happen, love, you can't afford it. That's the whole deal.
Dex: I don't insure anything. I just don't let bad things happen. Main character energy.
Nana: Dex, you dropped your phone in a pint on Saturday.
Chip: Insurance = lots of people pay a small amount so the unlucky few get paid out for a big loss.

Which loss is insurance MOST useful for?

Your flat flooding and wrecking everything you own. Yes. Big, unlikely, would hurt badly — that's exactly what insurance is for.

Hurting someone while driving → Worth insuring. Could cost a fortune — and driving uninsured is illegal anyway.
Losing your £8 phone case → Just save for it. Annoying, not a crisis. Absorb it.
Breaking your leg on a ski trip abroad → Worth insuring. Medical bills abroad can be eye-watering. Travel insurance exists for this.
A cracked mug → Just save for it. Rest in peace, mug. No claim needed.
Everything in your room getting nicked → Worth insuring. Replacing laptop, clothes and stuff adds up fast. Contents cover.
Fact: “Insurance companies pay out from a pool of everyone's premiums.” — That's the pooling idea: the many cover the few.
Myth: “If you pay for insurance and never claim, you've 'wasted' your money.” — You bought peace of mind and protection. Not needing it is the best outcome.
Fact: “The monthly or yearly price of insurance is called the premium.” — Premium = what you pay to be covered.