What is insurance, anyway?
Just like how the mitochondria is the powerhouse of the cell, insurance is the transfer of risk!
When something is insured, the risk of loss is transferred from you (the insured) to the company (the insurer). The insurer takes on that risk of you getting into a wreck, or your house burning down, or your personal property getting stolen.
Think of insurance like a big bucket of money. Everybody puts money into the bucket, which provides the funds to help you recover from a loss should you experience it.
When you insure something, you enter a contract with the insurer, who, when you experience a covered loss, will take the money out of the bucket and give you back what you lost, or at least as close to what you lost as possible. If you lose a 2018 Toyota Corolla, you will get back a 2018 Toyota Corolla.
However, not everything can be insured, since there's different types of risk. The only type of risk insurance companies will insure is "pure risk." This means that either something bad happens, or nothing happens. Either your house burns down, or it doesn't. You crash your car, or you don't. Your stuff gets stolen, or it doesn't.
Every individual is exposed to a multitude of risks, and the assessment of this risk is known as "The Law of Large Numbers." This means that some people are more exposed to certain types of risk than others. For example: Gloria, a 60 year old woman who has been driving since she was 16, is a lot less likely to get into a car accident than Joey, a 20 year old who just got his license last year.
Why do we need insurance?
Insurance is important and necessary to have in the money-based system we live in today. Like you, I'd enjoy it very much if things were different, but they aren't. Not everyone can recover from a severe loss, so you need to have a safety net available to you for those "what if" and "just in case" scenarios.
If you think insurance as a whole is a scam, well... you're not exactly wrong, but you aren't correct, either. If, for example, you never have anything go wrong in your life ever, then yeah, you'd be paying for something that you never use. But real life is never like that.
You are constantly one injury away from being disabled for the rest of your life. You're one car accident away from being unable to get to work. You're one bad storm away from your home becoming unlivable.
If you don't have insurance, then what's your plan to recover? How long would it take for you to get yourself back to where you were before? Can you save up in between bills, rent, and groceries to get back what you lost? Can you do it all by yourself?
That's why we have insurance!
