After leaving school you may find that old friends and new acquaintances have bought insurance. They may even work at insurance companies and try to sell you policies.

It's certainly alright to seek advice from old classmates or relatives in the insurance industry, and from insurance agents and brokers, but buying insurance from a friend without putting your own needs first is risky.

You need to understand and consider all the issues before deciding which insurance cover is best for you.

Guard against risk

Young and healthy people tend to think they don't need insurance. But the real value of insurance is to protect you when something goes wrong.

Insurance protects you in the event of accidents, illness and even death. It puts some of the financial risks on the insurer. If you have an accident and don't have insurance then you will have to cover the costs, such as medical expenses. If you include insurance in your financial plan, however, you can protect yourself, your assets and your family.

Life insurance is popular and provides financial protection for your family or dependants in the event of your death. Generally, life insurance benefits families that need financial support or have large debts such as a mortgage.

Four factors to consider:

1. Assess your needs

Before buying insurance, first carefully consider the purpose, then find out what the policy covers, and how much it will cost.

If you want to ensure your family is financially covered if you pass away, for example, then think about life insurance. To work out how much cover to get, first calculate the monthly expenses of your family. Then, estimate the payment period for all these expenses to work out the initial insurance amount.

Many Hong Kong employers provide group and health insurance. Ask for details about the level of coverage and then work out if you need extra insurance. Bear in mind that your insurance needs will change as your life and career develops. For example, after marriage and having children you may require more insurance. You should therefore review your insurance plan regularly.

2. Understand the various types of insurance

There are many different kinds of insurance, such as the following:

3. Choose a reputable insurance agent or broker and shop around

After deciding what coverage you need, choose the right insurance agent or broker. Remember, the various policies cover different things, so discuss with them which is best for you. Hong Kong has many insurance companies, be sure to look at the fine print, shop around and compare before making a decision.

Before buying insurance make sure your insurance agent or broker has explained fully the terms of the policy and its coverage. If you have more questions, contact the insurance company directly to make sure your policy is the correct fit.

It is important to understand the insurance contract is between you and the insurance company. If the person you bought insurance from leaves the company, do not cancel the policy and buy another one without checking, as your rights will be affected and you could lose money.

4. Assess your earnings

A comprehensive insurance plan that includes life insurance, savings, accident, medical and critical illness can provide comprehensive protection but can be expensive as well. Usually, the more the insurance policy costs, the greater the coverage and compensation.

If you are young and have just begun your career, you will usually be earning less. Learn to manage your income and expenses so that you can afford insurance. Also, take into account that premiums must be paid when buying insurance, which could mean long-term costs. If the policy has a savings or investment element, early cancellation of the policy may involve high penalty charges, which could affect your finances.

Young people can consider taking out basic insurance first, and add coverage when required. Personal insurance is a long-term financial commitment. If you don't pay your premiums, then the policy, and the protection it gives you, may be lost.