Insurance is a financial agreement between an individual and an insurance company that provides financial protection against losses. It works by pooling risks and compensating policyholders when a covered event occurs. The importance of insurance cannot be overstated, as it helps individuals and businesses manage financial risks, ensuring that unforeseen circumstances like accidents, health issues, or property damage do not lead to financial ruin.
Key reasons why insurance is important:
- Risk Management: Helps mitigate financial losses.
- Legal Requirements: Some types of insurance, like auto insurance, are mandatory.
- Financial Security: Protects assets and savings.
- Peace of Mind: Reduces stress related to uncertainties in life.