When you’re giving children an education in finance, one area that is vital to include is insurance. As a concept, the value of spending money on insurance can be a difficult one for children to grasp, but the tips below should help you illustrate and explain why insurance makes up an important part of a financial portfolio.
Explain how insurance works
Put in its simplest terms, insurance is there to protect a policy holder and their possessions should they suffer losses due to theft or another unexpected event. The easiest place to start is to explain that insurance is there to protect the value of your things.
Give kids an example to make it easier to understand. If they have saved up birthday money or pocket money to buy something special, demonstrate the value of insurance with this item. Get them to remember how long it took to save up for that item and then ask what they would do in order to replace it if that item was destroyed in a fire. You could then go on to explain how having an insurance policy in place would provide the money to replace that item.
Talk about the different kinds of insurance
Explain the different kind of insurance policies that you have – the one for your car, your home (buildings and contents, explaining the differences between the two policies), health insurance and pet insurance. Show them how you can do a search for new insurance quotes on a site like igo4 limited. Pet insurance is often an easy one for kids to get their head around.
Show them your insurance policies
Unless kids see the policies, the concept can still remain a little vague. Insurance policies don’t really make for easy reading, but sitting down and going through say, your car insurance policy, will allow you to explain what different aspects of the policy mean and it will prompt questions from the children if they don’t understand something.
Get them to understand the consequences of not being insured
Use the example of your home and the contents within it to explain what kind of situation you’d be facing if you didn’t have insurance and the worst happened. Get them to imagine what would need replacing after a fire or flood or anything else that would require a rebuild or refurbishment of you home, and how impossible that would seem without having an insurance policy in place.
