Why couldn’t somebody just put money in a savings account monthly instead of paying insurance monthly?
In: Economics
The purpose of insurance is to pay for catastrophic damages that are above what you could possibly pay from savings. What if you crash into somebody’s Range Rover tomorrow, or your house burns down next week? Would you have the $100k to replace their vehicle (on top of whatever damage was done to yours!) or pay to have your house rebuilt and replace all your belongings? That could easily run $500k or more. But if you have auto insurance, they’ll make the owner of the Range Rover whole by paying to replace his vehicle. Your insurance company will pay for your house to be rebuilt, pay to replace your stuff and pay for a place for you to live during the time that your house is under construction.
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