What Is Insurance and Why Do You Need It?

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What Is Insurance?

Insurance is a financial arrangement that protects you from unexpected losses or risks. When you buy insurance, you enter into an agreement with an insurance company where:

  • You pay regular amounts (called premiums),

  • In return, the insurer agrees to cover specific types of losses or damages (like accidents, theft, or illness), depending on the policy.

There are different types of insurance, such as:

  • Health Insurance – Covers medical expenses.

  • Auto Insurance – Covers car damage or accidents.

  • Life Insurance – Provides financial support to your family if you pass away.

  • Home Insurance – Covers damage or loss to your home and belongings.

  • Travel Insurance – Helps with unexpected events while traveling.

Why Do You Need Insurance?

  1. Financial Protection

    • Insurance protects you from major financial burdens. For example, a hospital stay or car repair can be expensive. Insurance helps cover those costs.

  2. Peace of Mind

    • Knowing you’re protected allows you to live and work without constantly worrying about “what if” scenarios.

  3. Legal or Contractual Requirement

    • Some insurance, like auto insurance, is legally required in many places. Others, like homeowner’s insurance, might be required by lenders.

  4. Risk Management

    • Insurance is a key part of managing personal or business risks. It transfers the cost of potential loss to a company in exchange for a known cost (the premium).

  5. Helps You Plan and Save

    • Without insurance, you’d have to save large amounts of money to cover emergencies. With insurance, you pay small amounts regularly to protect yourself from big losses.

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