What is Insurance and Why Do I Need It?

This month at BrightDime, we’re talking about insurance: how it works, the important types you should consider, and how much you need (or don’t need). If you had to list the most important things in your life, you’d probably think about your family, your health, maybe a home, car and some other important possessions. So how can you protect them from the risk of an unexpected event, such as an accident, illness or injury? The simple answer is: insurance.

Insurance is essentially an agreement from a company to compensate you financially in case of some specified event or loss. You can buy it for just about anything. But do we really need it for everything? Probably not. It’s a balance of weighing the potential financial loss if uninsured to the cost of the insurance premiums you have to pay. Some insurance is required (like home, auto, etc) and some is optional (life, disability, cell phone, pet, etc).

Before you buy insurance, a first step to protecting yourself and your finances is having some cash on hand to cover some of the unplanned expenses. Building a rainy day fund and emergency fund is the most important place to start preparing yourself for the unexpected. Having this cash reserve available that you only tap into when necessary is the base to building a plan to protect your assets. If you have a relatively large cash reserve you can buy insurance with a larger deductible, which will generally have lower premiums.

What are the most important kinds of insurance to consider? Read our full article here.

Have questions about the different kinds of insurance? Login and chat with a BrightDime coach.