- Personal insurance is a way to protect yourself and your belongings from many unknown risks. The concept of insurance is simple: many people come together to make payments to a joint fund. When one person experiences an accident, the fund pays that person, reducing the burden of covering such a large expense individually. Not having insurance means you will be exposed to these risks without the assistance of such a fund.
- Living without car insurance provides two formidable risks. First, you may be ticketed for not having insurance, since it is required in all 50 states. Second, you will be responsible for paying for all damages in an accident if you are at fault. Car insurance is required because the cost of repairing a car is too pricey for most people to afford. If one person causes an accident and cannot afford repairs, the other person would have to pay the price for the first party's mistake. If you have an auto loan, your lender will also mandate minimum insurance so you do not damage the asset and then default on the loan, leaving the lender with invaluable collateral. Failing to meet either legal requirements or lender's requirements for your car insurance will create financial penalties and undue stress to you.
- Lacking home insurance, like lacking car insurance, presents two risks. First, failing to meet mortgage lender's requirements can lead to foreclosure on your home. Second, you will have to pay for all damages to your home due to natural or personal disaster. When a disaster strikes, particularly a severe disaster, the cost to rebuild a home can be astronomical. Even minor problems like roof damage, plumbing damage or insulation problems can be too costly for one person or family to manage. Insurance will cover these costs when they arise. For any person with an active mortgage, the home lender will have minimum requirements. Again, this is to ensure a person does not leave a home damaged, then default on the mortgage. In that case, the lender would have insufficient collateral to recover losses on the loan. Failing to meet minimum home insurance requirements constitutes a breech of contract on the home loan, which can lead to foreclosure.
- Health insurance is one type of personal insurance not required by law. You may continue to go uninsured, but you will quickly find out that the cost of staying healthy without insurance is far too high. Health insurance companies negotiate for lower costs with health providers. They offer these lower costs to their customers, and the customers may see a reduction as high at 90 percent in standard medical costs. If you intend to go without low amounts of health insurance and simply avoid seeing the doctor, you should at least cover yourself in case of emergency. Emergency bills, like those charged following a car accident or sporting accident, are the highest of any medical costs. Going without insurance at all can lead to bankruptcy if an emergency does occur. You will have the option of electing coverage only for these emergencies and simply paying for routine medical expenses out of pocket.
