Why do people pay for insurance? If they have the money to ensure protection in the case of damage or loss that isn’t guaranteed, why not save the money for when something actually happens?
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A fair bit of the answer depends on which particular insurances you’re referring to.
There are the catastrophic cases:
Vehicle liability for example covers the potentially enormous cost of ongoing treatment for an injury caused to yourself or others. That’s not realistically an amount even most prudent savers would ever have stocked away early in their life, and even late life it could be ruinous to your future.
Personally I have life insurance to make sure my family is adequately provided for if something tragic happens to me. Im the bit breadwinner for the family my a significant margin, and the amount to cover my house, my children’s food, clothes, education, utilities, etc for the next 15-20 years is not something I can reasonably save up for relatively early in life.
For less catastrophic but still sizeable items:
Many people lack the financial discipline to have emergency funds available to cover major vehicle replacement or repair. The insurance is acting as that emergency fund without being available to blow elsewhere. These may be the situations you’re thinking of. This also applies to much smaller but still relatively indispensable items like a smartphone. Personally I opt out of these and can accept the risk of doing so but it’s a good idea for people more reckless with their spending.
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