What is a key benefit of having insurance?

Having insurance primarily serves the purpose of providing protection against unexpected financial losses. This means that when unforeseen events occur—such as accidents, illnesses, or property damage—the insurance policy offers financial support to mitigate the impact of those events. By transferring the risk to an insurance company, individuals and businesses can safeguard themselves from significant financial burdens that could arise from these unexpected situations.

This protection is particularly important as it allows individuals to maintain financial stability. For instance, a health insurance policy can cover medical expenses, helping to prevent overwhelming debt from hospital bills. Similarly, homeowners insurance can help cover losses from theft or natural disasters, ensuring that individuals do not face financial ruin due to the cost of repairs or replacements.

While it might be tempting to think that insurance could eliminate financial risks entirely or guarantee profits, that is not the case. Insurance can help manage and reduce risks, but it cannot eliminate them altogether, nor can it provide guaranteed returns on investments made through a policy. Additionally, while some insurance products may have tax advantages, the primary benefit lies in their role as a safety net against unforeseen expenses.