What is insurance and why do we need it?

Accidents happen at a time we least expect. Thus, we need to do everything that we can to protect ourselves from this kind of event. And one way to do this is by getting insurance. If you don’t want to experience financial losses – whether by accident or due to natural disaster – you need to be always prepared.

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Insurance helps us to manage the risks we are exposed to and protect ourselves from financial losses. However, it is not a simple task to get insurance where you will just go to an insurance company and purchase all the basic policies. If you want to have a good financial plan, you need to find the right kind of insurance. Though most of us have insurance, many people still lack the knowledge about the basic information including its importance and how it works.

To understand what is insurance, you need to know its definition first. Insurance is where the insured handovers the responsibilities of a financial loss to the insurance company, but in return the insured needs to give a monetary compensation – also known as the premium. All of us need insurance because it gives us the safety and security that we won’t experience substantial losses and financial problems in the future. One example is homeowner’s insurance. This is one of the basic policies that everyone must have. You can set the limit of the coverage based on the things that you want to protect yourself from. The basic risks that are covered by this insurance are fire, lightning, windstorm, explosion, smoke, vandalism, sinkhole collapse, volcanic activity, vehicle collision, and civil commotion. You can also add coverage for special risks, such as burglary, nuclear hazard, and earthquake.

You should consider getting insurance if you want to:

  • Protect your family from loss of income in case someone dies
  • Repay debt after death
  • Protect yourself from health problems
  • Protect yourself from lawsuits
  • Protect your home from different kinds of hazards
  • Protect yourself in case you become disabled
  • Protect your car from theft or accidents
  • Protect your business