As we go through life, inevitably we find ourselves in countless situations that put us and our assets at risk. We had to find a way where we could manage that risk, that’s how insurance came to be. First, we must understand what insurance is.
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Insurance is a contract in which we pay an insurance company a fee, and they provide protection of an unforeseen event. However, this does not mean we can insure everything, we are only allowed to insure a pure risk. A Pure Risk is a situation that will result in either a loss or no change in status. For example, if a hurricane comes and it floods the area where your property is, that is an unforeseen event that will result in a financial hardship. On the other hand we cannot insure a trade in the stock market or a gamble at the casino. Why? Because yes there is the possibility of losing the money you invested and there’s the option of breaking even which means no change in status, but there is the possibility of a gain. Thus, making this situation not insurable.
Now that we have a better understanding of what insurance is, what can be insured, and whatnot, let’s give some thought to why we even have to own it? Like said in the beginning, we face risky situations every day of our lives, and yes, we can avoid them.
For example, we can stop driving, we can stop going outside the house, we can stop doing all the activities that we find joy in. But realistically to live a plentiful life, we cannot stop living and thriving for the risk of something bad happening. That’s why insurance can help us leverage the hardship of danger. That’s why there is insurance for Cars, Life, Homes, and Health. If a car accident happens through insurance, we can submit a claim towards the insurance company that we pay a premium to. Same things happen with a property, if someone throws a cigar in the forest next to a home and the house ends up on fire, the policyholder can also submit a claim, that will be investigated for fraud, and if found to be truthful then a reimbursement for the destruction should be provided.
Consequently, if the life of the homeowner was taken by the fire and he had life insurance, then his beneficiaries will receive compensation for their loss. We also know that health services are expensive, and if we fall ill and don’t have insurance then we will have to take care of the bill with our own pocket. Insurance helps the average citizen to remain calm if the doctor’s appointment comes up as they can be checked without the worry of going bankrupt.
The importance of insurance speaks for itself, it gives us the ability to have inner peace with the events that we cannot control in our lives. Insurance teaches us that we better stay safe than sorry later.
