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What is the point of having insurance?

What is the purpose of having insurance? Why can't I just save my money and pay for accidents or losses as they happen?

avatar
Shannon Martin · Updated on
Reviewed by Shannon Martin, Licensed Insurance Agent.
“I get it! Insurance is one of those things in life that we hope never to use and it feels like a waste to pay for something we never want to use.
The point of auto and home insurance–insurance in general–is to spread and transfer risk. We can’t stop the risk from happening, but we can try to minimize risk by driving safe and keeping our homes in good condition. Even then, accidents happen.
Let’s say your
homeowners policy
 insures your home for $200,000. If there is a fire and you have a total loss, the odds are you don’t have $200,000 in cash to replace your house, but your insurance carrier does.
Same thing for your car.
Car accidents
 can cost thousands of dollars for physical damage and medical payments. Since you pay for car insurance, they will cover the damage, which is usually more than what we as individuals can do on our own.
Insurance can be expensive, but that doesn’t mean you can’t find low rates that fit your budget. Try using the free
Jerry
 tool to compare rates from the nation’s top providers in under a minute.”
MORE:
Pros and Cons of Bundling Home and Auto Insurance
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Jerry partners with more than 50 insurance companies, but our content is independently researched, written, and fact-checked by our team of editors and agents. We aren’t paid for reviews or other content.

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