Winthrop University: My Money Matters - Insurance - The Benefits

Insurance

The Benefits

Why Buy Insurance?

Insurance is all about risk and financial protection. When you drop a quarter into a million dollar slot machine, you know that your chances of winning are pretty slim, but what you’ve risked to win is pretty small. The entire concept of insurance works in much the same way. You pay premiums (your quarters) on a regular basis to an insurance company. “Winning” in this scenario would actually be if you got into a car accident next week, lost your home in a fire next month, or, even worse, suffered a heart attach and died. Any one of these events would likely cause a catastrophic financial loss to you or your loved ones. Thus, you purchase insurance so that the insurance company can step in and help absorb most or all of the financial impact in the unlikely event that you do “win.” You don't have to bear the risk of financial damage alone.

Costs and Benefits of Insurance

Cost is always an important consideration. Even if you appreciate the importance of disability insurance, you may be unable to afford it.  In addition, you should weigh the price of insurance protection against the potential benefits to you. For example, the chance that your dilapidated 10-year-old auto will be stolen is remote; even if it is stolen, your financial loss would not be great, so theft coverage might be a waste of money. The issue of life insurance is the next thing to consider. If you are single with no dependents, you may consider not purchasing life insurance; if you have a spouse and young family or your aged parents count on you for financial support, however, life insurance would protect them in the event of your death. Adequate insurance coverage is essential to help you meet your obligations in the event of a catastrophic accident or illness.

Last Updated: 7/13/22