Insurance. We all know we need it. We need it for our homes. Our cars. Our health. But we don’t all know what it’s all about. Therefore, it is our pleasure to put into simple language and terms what insurance is and means for you.
Using a simple analogy, insurance is like a gamble. Think of a slot machine. You put in quarter after quarter and hope to get a payout. On most tries a slot machine will come up an empty play. But on very few occasions it will pay out money.
Insurance is similar, but rather than hoping for a big profit you gamble that the insurance company will pay for large expenses if or when they arise. It is RISK TRANSFER. You pay an insurance company a premium month after month, and ultimately you may never get a payout in the form of a claim. But on the occasion that you need a major surgery, auto repair, or even the replacement of one of the largest investments of your life – your home, your insurance is there to pay for all or a portion of the expense.
You buy insurance so that you transfer some of the risk of financial loss to the insurance company. You protect yourself from large financial loss from any of the following:
- Large hospital expenses
- Losing income from your business due to fire
- Auto repair expense
- Protecting your family from lost income due to death
- Protecting your income in the case you become disabled and are unable to work
- Protection from liability in case of lawsuit
- Protecting your prepaid vacation from unexpected cancellations
This is not, of course, an all-inclusive list. But the big idea of why we buy insurance is clear; we wish to have an insurance company with large financial pockets at our disposal should we require financial protection.
An additional factor of consideration when applying the gambling anaology is the impact not just on the policy holder, but their family as well. Sure, if you are the lucky jackpot winner of millions of dollars your family will benefit. However, this is far and few between. Insurance takes the benefits beyond the individual partaking in the “gamble.” In fact, without insurance, should the policy holder lose their job, home, or health, the family members could also be devistated. To this end, not only will the policy holder garner peace and benefits, but their family and possibly generations to come will also be protected.
