What Is the Purpose of Insurance?

Insurance isn't a new concept. It's been around for a long time. You can insure anything you choose for a price. Most people insure their property, life, health or ability to earn an income.

Function

Insurance is a method of spreading the risk. Rather than lose everything, for a small premium or payment, the insurance company or group protects each individual from a large financial loss.

History

Archeologists found a Babylonian obelisk dating back to 2100 BC with the Code of Hammurabi, the king at that time. It guaranteed those with loans on shipments wouldn't have to pay back the loan if a catastrophe made it impossible. Early Romans had burial clubs where everyone paid for the funeral of the deceased member.

Features

The more likely the loss, the more expensive it is to secure the insurance.

Size

You can insure anything to value but never more than it's worth. The more insurance you purchase on an item, the higher the premium is.

New Types of Insurance

Life changes and so do expenses. Today pet owners find that veterinarian bills escalate so there's pet insurance. The cost of divorce is also high so a company now sells divorce insurance.

References

• TheHistoryOf.net: The History of Insurance
• Washington State Office of Insurance Commissioner: How Insurance Companies Set Rates
• Massachusettes Consumer Affairs: Pet Insurance
• The New York Times: Divorce Insurance; Jennifer Saranow Schultz