For a lot of people, insurance is just something you are forced to have. You are required by law to have auto insurance. Most mortgage companies will require that you keep a homeowners policy. And coming soon the government will also require you have health insurance. But there are good reasons why you should have insurance, even if you didn’t have to. We’re going to explain just what insurance is, how it works, and why its good to be a well insured man.
All of insurance revolves around the construct of risk. The world is an unreliable, unpredictable place. Good things can happen to you at any time, and so can bad things. The reality is that the universe works off of entropy, the slow diffusion of order. As humans, we prefer a well ordered world. We like a car that has all its parts together, and its metal still in the same shape as when it left the factory. We like having our house in the same condition it was yesterday, and we like having our same possessions there too. And obviously we all like to be healthy. But nature and the randomness of society, can at times threaten that order. While no company could protect you against entropy, they can do the next best thing, and pay to have your car, your home, your body fixed.
Of course you could do the same thing, if you have plenty of money. However what is the cost of open heart surgery? What is the cost of a lawsuit from a car accident? What is the cost of a new roof on your house? It is likely you don’t have that kind of money in your checking account. But you do likely have the cost of a monthly premium. So by paying your insurance company every month, you are provided with a service that protects you from large, unexpected costs.
The best way to be insured, is to be protected against these major calamities that are very expensive to fix. You don’t want to be using insurance for something you can easily afford to fix yourself. You don’t want to put a claim into your insurance agent for every little minor ding in your car. And part of the reason that health costs have skyrocketed is because people do overuse the insurance system for minor costs they could have covered themselves.
See the reality is that due to the sometimes unstable nature of the world, what you have could be taken away from you at any time. It can be very expensive to replace what you have. This is the whole point of insurance. By carrying a policy, you can replace what you lost. If you choose to go without much coverage, you are simply choosing to either have to pay to replace what you lose, or live without it. Either are fine, so long as you realize those are the real potential outcomes to living in our world.
Some people dislike insurance, and I think it stems from the fact that they are forced to buy it. I can completely understand that. No one likes to be told what to do. And no one likes to be told they have to spend their money a certain way, especially by the government. In a more perfect world, people would be cognizant of their risks and the government would respect their choices, and assume that they will act responsibly. But its just not the world we live in.