What insurance is for

Insurance helps transfer certain financial risks to an insurer. You pay a premium to keep coverage in force, and the insurer agrees to handle covered losses under the contract. Paying premiums does not create a savings account or guarantee payment for every problem. Coverage depends on the event, the people or property involved, the dates, and the policy terms.

Different protections serve different jobs. Property coverage concerns insured belongings or buildings. Liability coverage concerns covered claims that you are legally responsible for harming someone else or damaging their property. Health and life insurance serve other needs and have their own rules. Start with the financial consequences you want to manage, then identify the appropriate coverage. An affordable premium matters, but so do exclusions, limits, and what you could reasonably pay yourself after a loss.

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