Insurance is a fairly simple concept; you pay a company a certain amount of money in order to cover your own financial risks. In general the amount of money you pay, known as a premium, is far less than the amount paid out by the insurance company should your claim be successful. So why do you need insurance? Let us take a look at some scenarios:

Should you have a family and you unexpectedly die, could your family maintain the same standard of living without your income? If your answer is ‘no’ then you could take out a life insurance policy to pay out enough money to service your families financial needs long after you are gone.

Injuries and long term disabilities are almost scarier than death in terms of the financial burdens they could place on a family or individual. Could you afford to maintain your current level of living should you become disabled and unable to work? If you cannot then you could take out a disability insurance policy to cover you for this type of eventuality. This type of insurance is even more important for the breadwinners in families.

Car accidents happen all the time, but what would happen if you caused an accident with two other vehicles? Could you afford to pay for the repairs of not only your vehicle, but also those of the other two vehicles? You may also be liable for any medical expenses of the other drivers and their passengers. The bill for three cars and the medical expenses of several people could bankrupt most households. Taking out a car insurance policy could cover you for this type of scenario.

Many countries have poor public healthcare or lengthy waiting periods for access to public healthcare. If you or a family member becomes sick and requires hospitalisation or needs treatment for a disease like cancer, could you afford to pay for private healthcare? Adequate health insurance can pay for this if you cannot afford to pay for private healthcare from your own pocket.

Your home contains some of your most valuable possessions. If your home is burgled and your valuables are stolen, can you afford to replace them? Can you afford to pay for the damages to the building itself? Home and contents insurance can cover both your possessions and your house.

If you own your own business and someone is injured on your premises can you afford to pay for their medical expenses and cover possible lawsuits? Public liability can cover you and your business for this type of loss.

Any one of the scenarios listed here could result in a major financial loss to you, your family or your business. The cost of insuring yourself against these losses is tiny compared to the amount of money you would need to pay out of your own pocket. Accidents, crime and illness are a part of life and very few people go through life without experiencing at least one of these. Unless you are one of the privileged few who come from wealthy families with the resources to cover these types of setbacks from their own bank accounts, then you should think about taking out insurance to cover you where you are the most vulnerable to loss.