Share your insights or perspective on the financial matter presented in the input.

Why buy insurance?
Apart from legal requirements to have insurance, e.g. 3rd party car that other answers have covered well. We can think of all insurance as protecting our “usable” income, as we can use cashflow to pay the costs of a loan to replace whatever we decided not to insure.    So for example, if I don’t insure my house contents, I can replace them on my credit card if needed. Therefore we are paying for insurance out of our income, so as to protect our income, knowing that the cost of the protection is on average more than the benefit we get from it. But we all know that having an income of $50K is less than double the value of having an income of $25K.   (E.g. being able to eat and remain warm is more important to us then being able to go on anther holiday.)  This is way when someone has a higher income; it requires more money to effect their actions. Loss aversion is another factor; we are people not logistical machines.