Insurance = Peace of mind.
Simply put, insurance is a contract between you and the insurance company that protects you financially against damage to covered property (house, car, motorcycle, mobile home, RV) or you personally in the event you are sued as the result of an accident. As long as you pay your premiums on time and have not falsified information to get your coverage, the insurance company will pay for repairs or replacement of the property and/or pay any legal judgment against you up to the limits of your policy.
If you have a mortgage or car loan, the company making the loan will insist you carry insurance with high enough limits to cover the amount of your loan, so that they can still receive their money, should a total loss of the property occur.
Insurance companies can afford to cover your financial losses because they sell policies to large numbers of people at the same time, most of who will not need to make a claim at any one time. This large group of people (called a risk pool) pays more in premiums than the insurance company needs to pay in claims, which is how the business works.
