Wednesday, 1 June 2011

Do I need insurance?

One of the most commonly asked questions by people starting a business or buying a home for the first time is: "Do I need insurance?" What is the purpose of insurance? Some wonder why they need insurance when the risk of theft or property damage seems to be low. The reality is that in an uncertain world, insurance provides a means of spreading risk out among many people. While it's possible that you may never encounter a fire or a burglary --and we certainly hope you do not--, the possibility of such a dramatic loss means that an insurance plan is in your best interest. In this, the first post of the "Everything Insurance" blog, we will discuss why you should consider an insurance plan and moreover, why insurance is important for society at large.

The need for insurance was understood as far back as 5000 BC in China. When merchants transported their goods by river they would redistribute their cargo across multiple boats in order to limit the risk of losing a large boatload of product. They understood that if a merchant were to come across some dangerous rapids and lose an entire boatload of product, he or she would be totally wiped out. By making use of many boats, a merchant could lose a small boatload of product and still survive. The same principle applies to the modern insurance industry and the need for this kind of insurance remains the same.

To take a modern example, imagine that you own a small business. You've invested your life savings into your business, not to mention a good deal of blood and sweat! Now imagine what would happen if an electrical fire were to wipe out everything. Your financial future would be in jeopardy and all the effort you put in would be wasted. Instead of shouldering that loss alone, an insurance plan allows you to pay a small premium so that you are covered in the event of such a loss. In the same way that Chinese merchants spread their goods out among many boats to ensure they didn't lose one large boatload, an insurance plan allows you to spread out risk among many planholders so that everyone pays a small premium instead of a few members individually paying for large losses.

So how is insurance good for society at large? Ultimately, it allows individuals to pursue their business and personal dreams without worrying about encountering a serious financial loss! Entrepreneurs can feel that their investments are secure, and individuals can purchase cars and homes with peace of mind. In the end, it is about quality of life. With coverage, you can help to ensure that you and your family remain financially secure and happy!