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Why Do You Need Insurance?

Whether it be for your car, home, health or life, it’s probably safe to say that you have insurance in some shape or form. Maybe you purchased it because it was required, like when you bought your home or car. Or, perhaps you have insurance because it provides peace of mind, knowing you’re financially protected from the unexpected — or maybe both!

Whatever your reason, insurance is an important piece of sound financial planning. And it’s a small price to pay for the protection you get.

Let’s take a look at why you need insurance and how it helps protect what matters most.

Why Is Insurance Required?

Simply put, insurance is a way of transferring risks. For example, if you make a big purchase, like a new car or home, and you take out a loan or mortgage, your lender wants to be sure that your vehicle or home is protected from potential losses. How do they make sure of this? They protect their investment by requiring you to purchase insurance. So you put the cost of a potential loss into the hands of an insurance company in exchange for your premium, and they’ll invest your funds and pay out if you file a claim — subject to the terms and conditions of your policy.

Let’s talk car insurance for a minute. Almost every single state requires you to carry at least a minimum amount of liability insurance. Why? Well, with millions of automobiles out on the road, accidents are bound to happen. And the truth of the matter is a lot of people aren’t able to pay for the often expensive resulting damages.

States started mandating liability car insurance, which is what helps pay for damages you cause to other people and their property, in order to protect people and their property, so people affected wouldn’t suffer financially as a result of an at-fault driver not being able to pay them for the losses that occurred. And, to make sure you’re properly protected from the unexpected, you might even want to consider uninsured or underinsured motorist coverage, considering many drivers meet the bare minimum liability requirements in their state (or maybe don’t have insurance at all) and therefore might not be able to pay you if the damages incurred exceed their limits.

Confused? Think of it this way: Insurance is a way to help not only you but those around you. It’s a pool of money that you can tap into in times of need. Sure, you pay a fee to your insurance company and — we truly hope — possibly never have to file a claim, but the price you pay for protection compared to what you could pay if you didn’t have insurance (in the event of a loss) could be substantial and potentially have a major impact on your life.

Insurance for Peace of Mind

Life’s safety net. Financial protection. Peace of mind. Whatever you choose to call it, insurance is designed to protect you and provide you the comfort of knowing you have something to fall back on in case you face a loss. Again, you may buy insurance because you’re required to have it — in this case you need insurance in its truest definition. However, insurance should be a necessity for other reasons, too.

Here are some scenarios:

Life insurance isn’t required, but if an income earner in your family unexpectedly passes away, life insurance can help with things like maintaining your current standard of living. It could help pay for things like your mortgage, household bills, credit-card bills, child care, tuition and even final expenses, like funeral costs. It can be a smart financial move to have life insurance and it can help you in a time of need.

Or let’s say you cause an accident on the highway. Both cars face severe damage and both you and the other driver are taken to the hospital. The accident was definitely your fault — meaning you’d be responsible for paying the damage and injury expenses for both you and the other party. The other driver can even come after you with a lawsuit! Thankfully you’re a smart proactive planner who knows the importance of having insurance.

Perhaps you walk into your home and realize that someone broke in and stole thousands of dollars’ worth of electronics and other valuables. Or even worse, a tornado destroyed your home entirely. Some things are out of your control, like mother nature, some things you can take precautionary steps to avoid, like smart home security systems, but at the end of the day, you’ll be glad you had an invisible shield (insurance) surrounding you and your investments.

Remember: Not only is insurance required to protect a lenders investment, most importantly, it protects you, your family and your assets.

To sum it up, you may need insurance because:

  • It complies with state laws
  • It protects your mortgage, lease or loan company’s investment
  • It provides peace of mind
  • It protects you, your finances and everything you work so hard for in life

We’re Here to Help

We understand that insurance can be complicated, confusing and sometimes even frustrating. But knowing the importance of having it will hopefully give you some confidence and trust in your decision to purchase insurance.

We haven’t even mentioned protecting a business, farm or ranch, a boat, motorcycle or other assets. Of course, all of those are important to insure, too. If you have more questions or if you’re interested in getting coverage, an American Family Insurance agent is your advocate — always ready to help explain your options to make sure you’re properly protected. Because you can’t always plan for the unexpected, but you can be prepared.

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Related Topics: Insurance Needs , Insurance Terms