Insurance is a financial product that provides peace of mind and protection against loss, damage or theft. The list of what you can protect is almost limitless, with the most common relating to the things and people you love. For example, you can insure your home, car and phone. You can also protect your health and can even insure your life so your family would be looked after if something were to happen to you.
Insurance is all about managing risk. Some insurance is compulsory, for example, car insurance for drivers. You might need other insurance as a condition of contract, like home insurance if you have a mortgage on your home. Most other insurance types are a matter of choice, and involve you prioritising what's most important, within the budget you have available.
It may also be worth prioritising the risks that you'd find hardest to cover yourself. For example, most people would not be able to replace all their belongings after a serious fire, or pay for emergency medical treatment during a vacation.
For other smaller risks, it might be worth considering putting regular savings aside in an emergency savings fund, rather than taking out insurance. We consider this in more detail in section 5-Insurance Terminology.