Why is insurance important? It's a question that many people ask themselves, but few truly understand. The answer to this question is multifaceted and complex. In this article, we will explore four of the most compelling reasons why insurance is so important. We'll dive into why insurance is a must when it comes to car, business and home & contents.
The first reason insurance is important is that it protects you financially. One of the most valuable assets any home or business has is its financial worth, and if something were to happen which damages these assets beyond repair, then an insurance policy can help to restore them. Take home fires for example; they are one of the riskiest situations your house could be faced with. Fires destroy everything it touches, and no home is 100% fireproof; but home and contents insurance can help to ease the financial burden of replacing this asset and important items by paying out a cash lump sum to be put towards making your home whole again.
The key to note here is the transfer of risk. By working with an insurer, you are paying a premium to transfer the risk to the insurer, who will pay you compensation in the event of an unforeseen circumstance, as noted in your cover/policy.
Another reason why insurance is important is that it protects you from loss of property or liability. When a car accident occurs, the first thing people think about is their own well being and how much everything costs; but what they don't realise is that not everyone who becomes involved in car accidents are safe to drive again, so if someone else gets injured as a result of your car accident, you could be held liable. If the car accident was your fault, you want to be sure you are covered with car insurance that covers liability. If you aren't covered and you are at fault, any costs incurred from injuries to other people will come straight out of your pocket! This can be an extremely expensive and emotionally draining experience.
As we touched above, not having the appropriate cover can affect you in more ways than one. Having the right cover ensures that if something does happen, you are covered for it. By having insurance, you can rest assured that not only will your property and possessions be replaced if they are damaged or destroyed; but also any liability costs incurred by the accident.
Some types of insurance are necessary because they are mandatory. For example, Compulsory Third Party (CTP) insurance is mandatory in all states of Australia. You cannot register your vehicle without a policy in place. This insurance provides compensation in the event people are injured or killed when your vehicle is involved in an accident.
This is one example, but there are many others for varying industries and situations.
Insurance is important for many reasons. Without it, your home or business could be at risk of financial loss and potential legal trouble which would otherwise not exist. We iterate that the key to note here is the ability to transfer risk through the right insurance policies. Understanding what risks there may be in your personal or business situations is critical. Following this up by addressing these risks with tailored strategies to appropriately mitigate these unforeseen events can save a lot of pain and exorbitant unexpected costs.
Disclaimer: As with any insurance, the cover will be subject to the terms, conditions, and exclusions contained in the policy document. The information contained on this webpage is general only and should not be relied upon as advice. The opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific insurance product. It is only intended to provide education about the financial and insurance industry. The views reflected in the commentary are subject to change at any time without notice.
