Saving for the future is the most basic financial impulse, because the future is uncertain. We do not know what tomorrow will bring us, nor if we will be able to face the unforeseen events that may arise. The world is full of dangers and surprises, and they are not always pleasant. Sometimes, it is about natural catastrophes, accidents, diseases or conflicts that affect us without being able to avoid them. Other times, it is about wrong decisions, mistakes or bad investments that harm us. And other times, it’s just a matter of being in the wrong place at the wrong time. In other words, being victims of bad luck. For this reason, we can all suffer the consequences of an uncertain future at some time. That’s why, It is important to take forecasts that protect us from risks and allow us to face challenges with more calm.
Risk is basically a matter of uncertainty. And uncertainty is a constant source of anxiety. For this reason, the most sensible solution is to hedge risks with strategic thinking. That is, we have a plan A. But in case plan A fails, which can happen, we are not left empty-handed. We already have plan B ready. And if plan B also fails, then we have plan C. And so on. This way we feel safer and calmer. And we can better deal with unforeseen events and problems. Because risk will always exist, but we can reduce and manage it.
There are people who believe that everything will always be fine. They are the fanatics and the naive, who think they are optimistic, but are actually delusional. They think that planning for the bad is a form of pessimism or lack of faith. That if we send positive vibes to the universe, it will always return positive vibes to us. But this, of course, is a great irresponsibility. It is something unrealistic, childish and not very serious. The risks of the future must be faced, not denied. Because the universe is not a friend that takes care of us and pampers us. It is a place full of surprises and challenges. And if we are not prepared for them, we can suffer for our idiocy. Therefore, the smartest thing to do is to be realistic and prudent. AND Have backup plans just in case. So we can enjoy more of the good and better overcome the bad.
Insurance was invented to deal with not only the ups and downs of the financial markets, but also those of life. Since we can’t know the future, whether it’s good or bad, insurance is a way to help cushion the bad things that happen to us. But insurance is not just about money, it’s also about trust. Insurance is based on the idea that we can share risks with other people who are willing to pay a premium in exchange for compensation in the event of an unfavorable event.
Insurance implies a contract between the insured and the insurer, who undertake to comply with certain conditions and act in good faith. Insurance also requires an estimate of risk, that is, the probability and impact of an adverse event occurring. Insurance is, ultimately, a way of managing uncertainty and reducing anxiety about the future.
Hurricane Katrina, for example, hit New Orleans and its surrounding areas in 2005. Nearly 75% of the city’s housing stock was damaged and insurance claims totaled more than $41 billion,”making Katrina the costliest catastrophe in modern American history.”. The hurricane also demonstrated the limits of private insurance, as many homeowners faced a struggle to collect on damages. For example, if a home was covered by insurance against wind damage but not flood damage, some companies falsely determined that the latter caused the damage to avoid paying some policies. However, the federal government still took care of those left without insurance coverage.
Insurance originated in ancient Mesopotamia, where merchants paid a premium to protect themselves against the loss of their merchandise through theft or shipwreck. Later, the Romans invented funeral associations, which paid funeral expenses and provided support for the widows and orphans of their members. In the Middle Ages, religious confraternities offered similar benefits to their followers.
However, modern insurance arose in 17th century London, where a group of traders met in Edward Lloyd’s cafe to exchange information and share risks. Thus was born Lloyd’s of London, one of the most famous insurance institutions in the world. Lloyd’s took over marine insurance and faced big challenges like the sinking of the Titanic or the 9/11 terrorist attacks.
The pioneer of life insurance, which is based on the calculation of the probability of death according to age, sex and other factors, was a subject named John Graunt, who published in 1662 mortality tables based on London parish registers. . From there, companies like Equitable Life or Prudential emerged, offering policies in exchange for regular premiums. Life insurance became a lucrative business and also a form of investment and savings for many people.
Insurance is a way to manage risk, but not to eliminate it. Risk is always present in life and finances, and we must be prepared to face it prudently and responsibly. However, we cannot blindly trust insurance as a guarantee that nothing bad will happen to us, nor can we ignore the risks we take on by purchasing insurance.
We must be aware of the conditions, coverage and exclusions of the policies we take out, as well as the costs and benefits they imply. We must compare the different options offered by the market and choose the one that best suits our needs and expectations. And we must act honestly and transparently, both with the insurer and with the insured, to avoid conflicts or claims.
Insurance is a useful tool to protect us from risk, but it is not a magic wand that frees us from it. Don’t expect insurance to save you from a meteorite, a zombie attack, or an evil mother-in-law. Insurance has its limits and fine print, and it doesn’t always cover what you think. So don’t get too confident and be careful what you do. Insurance is your friend, but not your guardian angel.
Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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