Today we take insurance for granted. Some types of insurance such as motor insurance are mandatory, whilst others such as pet insurance are a matter for the individual to decide on. Insurance is a way of managing the risk of a loss, by distributing it or transferring it for the payment of a premium.
The Origins of Insurance
In the third millennium BC, Chinese traders did not have the option of taking help from shipping companies who could have moved their LTL freight from one location to another safely. Instead, while travelling on dangerous river rapids they would minimise the risk of losing their goods by distributing them among many different vessels. In this way, if one vessel capsized only a fraction of an individual’s goods would be lost. A little later in the second millennium BC, Babylonian traders introduced a different form of insurance in the form of a premium. Merchants sailing in the Mediterranean who had borrowed funds to pay for their shipment would pay the lender a further sum to guarantee that the loan would be cancelled if the shipment was stolen.
In the event of fire, contents cover for up to 60,000 will mean you can start again
The Great Fire of London in 1666 was the event at the root of today’s insurance industry. In four days, the fire destroyed over 13,000 houses, 87 churches and many other buildings, including St Paul’s Cathedral. It cost the city about 10 million – over 80% of London’s annual income. The idea of insuring against fire gained momentum. The Fire Office, England’s first fire-insurance company, was opened in London by Nicholas Barbon in 1680.
Following on from fire insurance, more risks were classified for insurance purposes and today virtually anything, from a field to a model’s nose, can be insured.
Types of Insurance
Home insurance is very common and can cover losses from fire, flood, accidents and theft. A person’s home is his or her most important investment and insurance for buildings and contents is generally considered vital. If your home is rented then your landlord will probably insure the building and you will just need to arrange contents cover for up to 60,000, or however much your possessions are worth.
Health insurance has become increasingly popular, although we still have a health service that is free at the point of use in the UK. Health insurance policies can cover claimants for the cost of private medical treatment and offer more flexibility in terms of appointment times and choice of consultants than the NHS. Conditions during any stay in hospital should also be more comfortable with a more hotel-like environment.
If you have dependents you will probably want to invest in life insurance to ensure that you family will be financially secure in the event of your death. There are different types of life insurance available and what you need will depend on your individual circumstances. You can also insure against critical illness, but policies generally only cover certain illnesses so you need to read the terms and conditions carefully.
There are many more types of insurance, including pet insurance, insurance for events such as fetes and festivals that may be affected by the weather, payment-protection insurance, public-liability insurance and business-interruption insurance. It is even possible to insure yourself against being abducted by aliens, although as the burden of proof lies with the claimant, it is unlikely to be easy to get a payout.