Most of us are living on a budget. When we spend money, it is usually for something that we want to get, or for something that we want to continue to have. Those of us who can afford it, however, are spending quite a bit of money on some things that we hope we will never have to use. That something is called “Insurance”.
I think that insurance might very well be the only thing that works in this backwards fashion. Usually, you find something that you want, and you spend money in anticipation of enjoying whatever it was that you are buying. If you hear that your favorite band is going to be playing a concert soon, so you excitedly spend money on tickets, and think about how fun that night will be. If you are planning a vacation, you shell out money for plane tickets, hotel reservations, and expensive dinners and drinks, as you dream about how relaxing that weekend, or week, will be. You buy a brand new TV because you want to enjoy watching movies and sporting events on it.
Then, there are other things that you spend money on because you want to continue to have them. You pay your utility bills to make sure you home will have power, water, and heat. You keep making payments on your vehicle, so you can continue to drive it.
When you spend money on insurance premiums, however, it is for the opposite reason. You buy insurance because you want the protection it provides you with in case something bad happens. It doesn’t prevent those bad things from happening, but it gives you a certain amount of peace of mind.
In some ways, buying insurance is a modern version of “magical thinking”, at least for some people. You buy it, and hope that the events you are worried about will never happen to you. You buy health insurance hoping that you and your family never have a serious illness or injury. You buy car insurance in case you get into a car accident, but you still hope to never experience one. You purchase flood insurance around the same time that you buy your home, on a day when it might not even be raining.
You cannot prevent tragedy from striking just by purchasing insurance against it. However, I think at least some people feel as though negative events won’t happen now that they are spending money on the type of insurance that would help pay for the costs associated with a negative event. Everyone knows that it is less expensive to buy insurance than it is to pay for repairs and medical bills completely out of your own pocket.
Image by Dustin Moore on Flickr