You pay the insurance company when you buy it. These sums are referred to as “premiums.” In exchange, certain risks are covered. In the event of losses, the company has agreed to compensate you.
The idea behind insurance is that spreading the risk of a loss, like a fire or a theft, among a large number of people lowers the risk for everyone.
Numerous customers use the insurance company. All of them pay premiums. There will not be a loss for every client at the same time. They might be able to get insurance money to cover losses.
Insurance isn’t required for everyone, but it’s a good idea if you have a lot of financial risk or investments at stake. However, insurance is typically required for loan approval when third parties have a financial interest in the property, such as when a bank holds a mortgage.
Some insurance comes at an additional cost, while others, like auto insurance, may have minimum requirements set by law.
