Thousands of years ago many ships were lost as they went down the dangerous Yangtze River in China. Merchants got together and put different parts of their loads on different ships so that if one ship went down, everyone lost a little and no one merchant lost everything. This was the first type of insurance.
Even today, the concept of insurance is still the same: a lot of us share a risk so if something bad happens, we all lose a little rather than one of us losing everything.
You can buy insurance on anything. A famous 1930s actress, Marlene Dietrich, insured her beautiful legs. There are even insurance policies against being captured by outer space aliens or being eaten by ghosts.
Most people buy or pay “premiums” for five kinds of insurance: life, health, property, casualty and liability. Let’s take a look at each:
Life insurance provides money when someone dies. People who are supporting a family need life insurance, although they can usually cut back on the amount they carry once their dependents no longer need support.
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Some experts say that children or single people do not need life insurance except for “burial policies” covering funeral expenses.
Health insurance covers medical bills and other financial losses when you are sick or disabled. Many people do not have to buy health insurance because their employers provide it, or they are covered under government programs like Medicare or Medicaid.
Property insurance will replace things you own that get lost, stolen or damaged. There are many kinds of property insurance such as automobile, business and homeowner.
Casualty insurance protects you against sudden unexpected losses like accidents.
Liability insurance covers damages that are your fault. This kind of insurance often pays for your legal expenses, too, when someone sues you in court.
The more people who buy insurance, the less it costs. Also, in general, the less likely the bad thing is to happen to you, the less your insurance costs.
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