Insurance is something that most people have in some form to some degree, yet, you say the word insurance and eyes glaze over. Having been in the industry more than 30 years, it has always seemed odd to me that something nearly everyone has and uses is so totally misunderstood and that many people pay out money for insurance yet don't have a basic understanding of how insurance works. My intention is to assist people in the understanding of the why and how of insurance.

Most people have some kind of insurance because they have to - for medical or for a home loan or a car loan or to comply with state laws. My purpose here is to make insurance easier to understand for anyone and everyone. You don't have to be a claims adjuster or an attorney to be able to read your policy. And everyone should be able to go to their agent with some degree of knowledge and understanding to purchase insurance coverage appropriate to their needs without blindly thrusting the responsibility at another and simply writing the check for the premium.

Why not be able to intelligently discuss your needs with your agent and allow him or her to better serve those needs?

I'll try not use words and phrases that cause the glazing of the eyes but sometimes we may have to. Hopefully, we can stick to simple words and examples to bridge the gap between Huh? to Oh!. The purpose is to provide general working knowledge and awareness that will shine some light in the proverbial tunnel.

Basically, insurance is financial protection against some type of financial loss. The insurance company spreads the risk of this loss across a group of people with similar insurance needs. The insurance company says that for a certain amount of money from you, they will pay you the value of your property, self or situation in the event there is loss to your property, self or situation due to some unforeseen, unintentional event. In a way they are "gambling" - assuming a risk - that not all of their policyholders will have a claim at the same time or ever.

This amount of money you pay the insurance company is called your premium, which is only a small fraction of the value of what is being insured. The premium is probably the biggest issue for people. You are paying a premium for whatever you are insuring, to protect you in the event of a loss. The insurance company is covering the value of whatever you are insuring for that premium, ready to pay you in the event of a loss.

It is somewhat amusing that people are annoyed that they "pay and pay" but never get to "use" the insurance. They should be happy, as it usually means they have not needed it and that is a good thing. Fewer claims means lower premiums for all. Of course, this is a very simplified explanation of what insurance is and is just the tip of the iceberg.