What Insurance is All About

While some people consider insurance to be a four-letter word, nearly all of us need insurance of some sort, whether it is for our homes, our cars or to protect our loved ones.

To understand what insurance does, one needs to know what insurance is. As simply as possible, insurance is a tool that individuals, families and businesses use to transfer the financial risk of loss from their own pockets to those of a third party, which in most instances is an insurance company.

For most people, there are five major areas for which we need insurance—our homes, cars, lives, businesses and health. If we were to lose one of these, the financial impact on our lives, and on those of our spouses and children, would be significant. For example, should someone's $250,000 house burn down, the father and mother likely cannot come up with $250,000 on their own to replace that house.

That's where insurance comes in. Insurance is designed to help make people as financially whole as possible should something bad happen to them or their property. In other words, insurance provides financial protection against things that can have devastating effects on our lifestyle or income.

Insurance is designed to pay for the catastrophes that we could face. What are some of them? Well, a fire or tornado could destroy our house. An accident could total our car. Such sicknesses like cancer, diabetes or leukemia can ruin our health. And of course, a death can take away our ability to make money. In most cases, none of us can afford to pay for or replace these things should they be lost. That's why we need insurance.

Our country's economy and standard of living could not survive or grow without insurance. If business owners couldn't have bought insurance to protect their buildings, equipment and important papers, then they would not have taken the chances to start their businesses in the first place. The risk of loss would have been astounding. That is what insurance does, it reduces our risk of loss so that we can start businesses and create jobs. Without insurance, we all might still be living in log cabins, hunting for our own food and raising our own fruits and vegetables.

Insurance helps reduce the stress and anxiety in our lives. Most of us know that if we are in a car accident or if our house catches fire, we have insurance to help us replace it. Insurance provides some certainty in our lives. In other words, insurance provides peace of mind. And for most of us, we couldn't survive without that. That is what insurance is all about.

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