The importance of insurance
Humans tend to be risk averse because they don’t like to lose or get hurt. Sure there are plenty of gamblers and risk takers out there. But if you were ask the average adult who is over 35 they would probably say that they would take safety over risk, unless ofcourse the risk was minimized. Life in itself is a pretty big gamble over all. Look at the decisions that we make in our daily life, we gamble that our college education will land us a good job. We gamble that we will make it safely to work. I could go on and on with this list. However many of these risks are basically things that we can live with.
This brings us to the subject of insurance and what is insurance. Why do you buy insurance…do you really need it? According to various financial counseling courses I have gone too, one of the financial foundations is having adequate insurance. This generally includes having renters, automobile, umbrella property, life and health insurance. Because life a pretty big gamble these are ways to mitigate the risks that you take on a regular basis. I mean if your car gets crashed into you want to some way to be able to pay for it wouldn’t you or if you got sick then you should be able to pay for it? Do you know now much it costs to pay for these things by yourself?
This is what insurance is set up for, you essentially pool your money with lots of other people in the hopes that you will never have to use it. The insurance company then takes that money and invests it in other programs and hopes that they don’t have to pay out and that they can make money of of their investments. Insurance companies take a pretty big risk themselves in insuring you. If you are 18 years old with a 67 Mustang they will charge a lot of money to insure you cause the likely hood that you wil crash that car and/or into something else is pretty significant. However if you are in your 40s with children and drive a minivan your insurance will likely go down cause you probably don’t want to have to pay for a new minivan and wouldn’t want to injure yourself or your kids.
When looking at your current situation you are in one of the big questions to ask yourself is how do I hedge against the future. This is where insurance can play a big role so when you are hurt or your property is damaged you don’ t have to lose massive amounts of money and or time in order to remain financially strong.