Insurance can be viewed by the user as either an expense or as protection against the worst-case scenario, depending on the perspective. While there are cases where a person pays and doesn't use the service, there are also cases where a person pays for a long period and ends up using it at a critical moment, preventing the worst from happening due to lack of resources. Therefore, we will analyze the insurance sector from the perspective of the user and the company, and then consider the constant evaluations needed to ensure that insurance does not become a "subscription" with costs exceeding the potential benefits.
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Insurance Sector: User vs. Company
For the user, insurance serves as a way to be prepared for a critical scenario, when some type of emergency occurs and they do not have the necessary funds to deal with it alone. For example, a person may not be able to pay for serious medical care, or a complete home repair in the event of an environmental disaster, such as tornadoes, floods, or earthquakes. Thus, insurance is a way to be prepared and have peace of mind knowing that even in the worst situation you will be prepared.
While researching the subject, I found some accounts of situations people may encounter, such as "why am I paying for insurance for so long if I don't use it?". The first was a user who reported paying for insurance for 15 years, and only used it when their house was flooded, but it was worthwhile because the destruction of the residence was almost complete. Another case was of a father who paid for health insurance and ended up having a sports accident that required emergency air transport. In both cases, these are things that no one could have predicted and that, if they happened suddenly, they might not have enough money at the time if it weren't for the insurance.
For companies, the insurance sector is perfect for them to operate in because people pay for it and generally don't use the benefit. Furthermore, those who take out insurance expect not to need it, because, for example, in the case of car insurance, nobody will drive recklessly and risk an accident, putting their own life at risk. In other words, it's a sector closely linked to the financial area, since they balance the amounts paid by those who don't use the full service with those who are careful and rarely use the service, allowing them to generate income from revenue as well as from savings.
What do you need to evaluate?
There is a major problem that can arise with insurance policies, which can cause them to become like streaming subscriptions that you pay for automatically but don't use. However, in this case, it's necessary to analyze more deeply because you won't always end up using the insurance; it's specifically for unexpected situations. However, since they make constant charges, users who have contracted the insurance eventually stop re-evaluating whether it still makes sense for them to have that insurance or not.
Therefore, the advice for those who take out insurance is to periodically reassess whether it's really worth having the insurance or not. If you've been paying for a long time and haven't used it, you might conclude that if, instead of paying for insurance, you had saved the money or left the money earning interest in some safe investment, you would already have the necessary money for an emergency.
This issue of saving instead of taking out insurance is a very curious situation that many financial influencers comment on. Because many people find it normal to pay for insurance and pay constantly without missing the deadline, but have extreme difficulty saving money monthly because they spend everything before having a portion set aside for emergencies. In a scenario where a person is careful not to use the insurance, the amount charged is more expensive than the benefit when compared to the possibility of saving the same amount. Saving the money might be considered, but depending on the situation, even if the insurance isn't used, just having it can prevent a serious crisis. So it's important to consider both sides of this equation: potential benefit and cost.
