Insurance is life's only defence against costy hand of fate

View from Here It can't exactly prevent disaster, but insurance can help with the financial burdens that come with it.

When I was 10, I told my mother I would like to own a motorcycle when I was old enough. So the next day, she took me along to the casualty unit of a state hospital, where she worked as a nurse.

"Look at this stupid man," she said, ushering me to the bedside of a burly, tattooed fellow, who appeared to be missing a leg. "See what happens to silly men who ride motorbikes?"

My mother continued like this for the next few minutes, ignoring the glares of the wounded biker, who wisely said nothing as she used him as an object lesson. Later, she would be back with a large needle for his medication.

Her show-and-tell session did have an effect on me, though. I resolved that when I did get a bike, I would also make sure that if I ended up in hospital, it would be the private kind, where nurses came around with tea and biscuits, instead of cringing 10-year-old boys.

Today, of course, I know the word for this kind of disaster provision: insurance. This is one of life's less pleasing expenses, but, when you need it, you sure need it. Today, short-term insurance is available for pretty much any eventuality. Some of them are worth considering.

Car insurance, especially in the UAE, is a must. Anyone who has had to pay a visit to a body repair shop in Musaffah will confirm this. So is a general household insurance. Although most UAE expats live in rented buildings, furnished by the gentlemen from Ikea, it might be worth tallying up what is valuable and what is not.

Computers, TVs and other electronic devices add up to a surprising amount of money. Covering them for fire, flood and theft is a basic provision that you could well be thankful for down the line.

Travel insurance is another often overlooked necessity - one that many expats forget about. The UAE is a great place to use as a base for exploring the Middle East and Asia, and many of us do just that. And with travel, comes the risk of injury or loss of personal items such as money and passports.

Travel insurance is probably one of the easiest types of risk packages to acquire - banks such as HSBC offer it. Lately, I've used a product called World Nomads, which will underwrite a travel package online and saves a lot of hassle.

Ultimately, insurance is a card against fate. It can't exactly prevent disaster, but it can help with the financial burdens that come with it. It was this principle that lead to insurance in the first place.

Romans would take out ransom policies so if they were captured by pirates, they would be returned home and not spend their days rowing a galley around the Mediterranean.

During the 17th century, merchants gambled fortunes to send leaky ships to the Far East, which they hoped would return laden with spices and textiles. If a vessel failed to return - and many ended up in Davy Jones's locker - the investors faced ruin. As a result, Lloyds of London was established.

Hardly surprising then, that shadier investors quickly realised they could make more from insurance payouts than from actual cargo.

Dodgier merchants began signing up rotting old hulks, crewed them with a few dispensable lads from the farm and sent them on their way. As losses of ships began to climb, the insurance industry invented loss assessors to inspect ships and crews before they would underwrite them.

Today, insurance has become so ubiquitous that even the companies that provide it take out insurance policies themselves. The kind of household risks - a house fire, burglary and more - that unexpectedly complicate our lives are a part of everyday business for insurers.

But wholesale disaster, such as the tornados that recently destroyed the town of Joplin in the US, are less easy to plan for. Too many claims at once can wipe an insurer out. Lloyds, for instance, was almost destroyed by a wave of unexpected asbestos-related claims in the 1980s.

So a good insurer usually signs up with a reinsurer, a kind of big brother that helps the smaller company spread the risk. Reinsurance is the primary reason catastrophes, such as the tsunami and earthquake that struck Japan, did not wipe out that country's insurance industry.

Spreading the risk is what insurance companies do best. You can't stop the heavy hand of fate from landing on your unwilling head from time to time. But if it has value to you, it is worth insuring.

Gavin du Venage is a business writer and entrepreneur based in South Africa.