What is Insurance?

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What is Insurance?

We all have to purchase insurance at some point in time. It is a natural reality in America. My inquisitive nature will not allow me to leave the natural course of things as they are. I have never been one to simply except the status quo. Since I was a young child, I have been acquainted with insurance, at least by word. I knew that a man came by the house, pulled out a stack of papers and convinced by mother to give him some money for them.

Now my mom giving some man, who stops by the house, some money was not out of the ordinary. There was the vacuum cleaner salesman, the milk man, the linen man, and thank God, the encyclopedia salesman. By the way, my mother bought me the entire volume of the Encyclopedia Britannica when I was only five. I read the entire volume before I was 10. Kind of validates or explains my inquisitive nature and quest for knowledge. So, what was different about her giving this man money for these papers? I believe it was the ambiguity in her explanation of what it was.

These particular policies were life insurance policies for the family. My mother always took the time to sit down and explain things to me in detail. The first thing I learned is that the man that came by with those papers was an insurance agent, not a salesman. Actually, as far as I was concerned, he was a salesman, and my mother was not getting off that easy. She also explained that insurance serves to ease the burden of people who experience tragedy. In the case of life insurance, when someone dies a person called a beneficiary gets money. Initially, I had an issue with this. First of all, why should someone benefit from my death? Second of all, who gets to pick the person who benefits from my death?

She went on to explain that there are expenses associated with burying the departed, as well as covering any unpaid debt or accrued medical expenses. As far as who received this money, that was primarily up to the insured, except for cases when the insured was underage or incapacitated. So, this meant I had no so say in who got the money in the case of my death. That was not a huge problem, I didn’t plan on dying.

Now, what did not help the matter any, was the television special that portrayed a true story in which a man took out a policy on his entire family and then killed them all in order to collect the money. Needless to say, there was another conversation coming for mom and I. Not really, mom never expressed anything but love and acceptance for me. Now dad may have had a little something to worry about; not really.

I learned that insurance is a powerful tool to help people manage their lives, even in the case of tragedy and misfortune. It protects them from liabilities associated with accidents they may have, in which others are harmed or killed. Auto insurance, home owners insurance, and all other forms of insurance are an invaluable tool to the American economy and remains a stabilizing force in the American home. I guess my mother’s explanation of insurance wasn’t that ambiguous after all.