Insurance

Insurance pools small contributions from many people so that whoever suffers a loss can be compensated generously from the pool. It spreads a risk no individual could absorb alone across a large group.

So insurance is not saving; it is the cost of transferring risk. If nothing happens, the premiums do not come back, and that is the normal outcome — not a loss but evidence that nothing went wrong. Confusing the two is how people end up buying savings-type policies they do not need.

The principle for buying is to insure what is unlikely but unaffordable: death, serious illness, fire, a car accident. Insuring small losses you could absorb yourself only raises the premium.

What you need changes with circumstances. Life cover matters greatly with dependants and much less without them; health and illness cover grows more important with age. A policy is not a one-time decision — review it every few years.