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?

Answer
“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.”
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Shannon Martin
Answered on Jul 26, 2021
Shannon is an expert in personal lines liability insurance with 13 + years of insurance industry experience. She also served as a special insurance liaison to AARP members for 6 of those years. She is a graduate of UL Lafayette and currently resides in NY with her family. Shannon is also an amateur juggler, ukulele player, and is a time travel paradox theory enthusiast.
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