Why Do We Need Insurance?

"Why do I need insurance?" you may ask. Good question. There's also a good answer a couple of them in fact.


First, insurance provides disaster protection. The last thing anyone needs is to see their income or life savings jeopardized as a result of the death of a family breadwinner, a major home fire, or an automobile accident that leads to legal action. Events such as these are traumatic enough, without adding financial devastation to the equation.


Second, insurance gives you peace of mind. You know that if anything happens to you, the family will be financially secure.You can relax a little more while you're on vacation, knowing that if someone should break into your home and carry off your television set, you're covered. There are very few things in life that we're prepared to pay for even though we know we may never use them, but insurance falls into that category.


The danger is that you won't know where to stop. The range and scope of insurance policies are expanding all the time. There are coverages available today that were unheard of a decade or two ago. My parents were never exposed to critical illness insurance, or long-term care insurance, or out-of country medical insurance. Today, these products and many others are aggressively marketed. This trend even extends into the retail sector, where extended warranties have become big business. At the core, these warranties are just another form of insurance, in that they protect you if that new appliance breaks down after the manufacturer's guarantee expires.


If you're not careful, this proliferation of insurance products can lure you into buying coverage that you don't really need. Before you spend a penny, ask yourself one basic question: If I don't buy this policy, am I putting myself and my family at serious financial risk from a genuine and common danger? If the answer is no, pass!