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Insurance

Insurance is a financial tool in which one party pays an ongoing payment, called a premium, to another party, called an insurer, for the insurer to assume a financial risk. The contract is called a policy.

What the heck that means

So, for example, if my wife has a really high-paying job, and I am illucratively pursuing my dream of being a novelist, I would have no way of supporting our kids in the unfortunate event of her death. She has 22 years until her planned retirement, so she might buy a term life insurance policy with a term of 20 years and a benefit of $2,000,000. I (or our kids) would be named as the beneficiary. We would have to pay a premium to the insurer for 20 years or until my wife's death, whichever comes first. If she dies within 20 years, I (or our kids) get $2,000,000. If my involvement in her death is discovered, I do not get the benefit, nor do my kids (who go to their godparents or a foster home), and I go to jail for a life term (no etymological relation).

Various kinds of insurance

  • Other assets. Policies are available to protect appropriate risks for many kinds of assets. Typical one include--
    • Motorcycles
    • Boats/watercraft
    • RV's/campers/trailers
    • ATVs
    • Jewelry
    • Furs
    • Computers/software
    • Aircraft
    • Firearms
    • Antiques
    • Valuable collections of all sorts

Lloyd's of London is said to write insurance for special risks such as the stripper with the $50,000 treasure chest. Similarly singers have been known to insure their vocal cords; surgeons their hands; etc, etc.


What to do about different kinds of insurance

Most kinds of insurance have very particular uses, so don't worry if you're not insured against kidnap for ransom. I'm not either, and I'm more of a celebrity than you. If you have a car, get car insurance; if you own a home, get homeowner's insurance. Term life, long-term care, and health insurance are often considered useful as well. If you face a risk that could pose a substantial financial risk to you or your loved ones, look into insurance. But don't go overboard. Air traveler's insurance is not for you. How do I know? Because it is not for anyone. It is something airlines made up in their attempt to return to profitability.

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