To insure is to protect or secure oneself from a possible contingency. The future is very unpredictable and unless you have a time machine or you can foretell future events like Nostradamus you cannot know what will happen tomorrow. The upcoming event may either be beneficial or it may unfavourable. While the favourable circumstances are always welcome, we cannot skip or escape the unfavourable event as there is no way to prognosticate its occurrence. The best thing we can do is be prepared for such loss bearing circumstances – Insure yourself.
Insuring is the second step in the achievement financial self-sufficiency after saving – We save for a possible contingency. The money saved is used when the contingency arises. The concept of using one’s own money that was saved to cover a possible future loss is called self-insurance. Self-insurance is only effective when the amount of loss is small and the possibility of occurrence of the event is highly probable.
Since we cannot estimate the total loss that may arise in the future and in most cases the probability of occurrence of an unfavourable event cannot be estimated reliably we have the option to approach an insurance company. The insurance company collects a small amount from its customers over a specified period with a promise to compensate a lump-sum amount in the event of a loss.
Insurance provides financial security and independence when a loss occurs. One need not resort to begging or borrowing if he has insured the loss. He can use the compensation from the insurance company to get himself back on track. For example Mr X and Mr Y are two retailers who have their stores in the same building. Mr X has purchased a policy of fire insurance but Mr Y has not purchased any policy. The building catches fire and both Mr X and Mr Y suffer a huge loss. The policy purchased by Mr X provides a cushion for him during the fall and he could restart his business while Mr Y didn’t have any funds available with him to resume his business. Purchase an insurance policy and stay in business or go bankrupt.
Insure the financial wellbeing of your family. We have heard of many cases of death of young individuals who were sole bread earners of the family. “If your child, spouse, life partner, or your parents depends on you and your income, you need insurance.”
Insure your health – The medical expenses are constantly on the rise. Everyone wants to avail the best medical facility possible but they have to pay a large sum to avail them and not everyone can afford it. A medical insurance is useful in situations where one cannot afford to pay for the best medical facility available.
A part from life and medical insurance which are the basic insurances there are many other things that can be insured. The Insurance sector is vast – anything on the face of Earth can be insured. Footballers like Lionel Messi and Cristiano Ronaldo have their legs insured. Bruce Springsteen American singer – songwriter has insured his own vocal chords for $5.7 million. Food and wine critics insure their sense of taste and smell. The Rolling Stones guitarist Keith Richards has his fingers insured.