Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss

Many people may think that insurance is an unnecessary expense or a luxury that they can do without. However, this is a dangerous misconception that can have serious consequences. Without insurance, individuals, businesses, and society as a whole are exposed to various risks that can affect their well-being, security, and prosperity. In this article, we will explore some of the risks of not having insurance and how to avoid them.

The Risks of Not Having Insurance for Individuals

Individuals who do not have insurance are vulnerable to many types of risks that can impact their personal and financial situation. Some of these risks include:

• Medical expenses: Health care costs are rising every year and can be very expensive, especially for serious or chronic conditions. Without health insurance, individuals may have to pay for medical bills out of their own pocket, which can lead to debt, bankruptcy, or even worse, lack of access to quality care. According to a study by the American Journal of Public Health, medical debt contributed to 66.5% of all bankruptcies in the United States in 20072. Moreover, uninsured people are more likely to delay or forego preventive care, screenings, and treatments, which can result in worse health outcomes and higher mortality rates.
• Loss of income: Individuals who suffer from illness, injury, or disability may lose their ability to work and earn income. Without disability or income protection insurance, they may face financial hardship and struggle to meet their basic needs and obligations. According to the Social Security Administration, one in four workers will become disabled before reaching retirement age4. Furthermore, without life insurance, the death of a breadwinner can leave their dependents without a source of income and support.
• Property damage: Individuals who own property such as a home, a car, or other valuable assets may face the risk of losing or damaging them due to accidents, natural disasters, theft, vandalism, or other unforeseen events. Without property insurance, they may have to bear the cost of repairing or replacing their property, which can be very costly and stressful. According to the Insurance Information Institute, the average claim for property damage and theft in the United States was $10,592 in 2019. Additionally, without liability insurance, individuals may be held responsible for paying for the damages or injuries they cause to others or their property.

The Risks of Not Having Insurance for Businesses

Businesses that do not have insurance are also exposed to various risks that can affect their operations, reputation, and profitability. Some of these risks include:

• Business interruption: Businesses may face the risk of interruption or disruption due to events such as fire, flood, storm, cyberattack, pandemic, or civil unrest. Without business interruption insurance, they may lose revenue and incur extra expenses while trying to resume their normal activities. According to a survey by Zurich Insurance Group, 75% of small and medium-sized businesses experienced at least one business interruption event in 20196. Moreover, without contingency insurance, businesses may face losses due to the cancellation or postponement of events such as concerts, festivals, conferences, or sports matches.
• Legal action: Businesses may face the risk of legal action from customers, clients, employees, competitors, regulators, or other parties due to issues such as breach of contract, negligence, defamation, infringement, discrimination, harassment, or wrongful termination. Without professional liability insurance or general liability insurance they may have to pay for legal fees, settlements, or judgments, which can be very expensive and damaging to their reputation. According to a study by Hiscox, the average cost of a small business lawsuit in the United States was $160,000 in 2018. Furthermore, without cyber liability insurance, businesses may face losses due to data breaches, cyberattacks, or ransomware, which can compromise their confidential information, customer trust, and business continuity.
• Employee injuries: Businesses may face the risk of employee injuries or illnesses due to accidents, hazards, or occupational diseases at the workplace. Without workers’ compensation insurance, they may have to pay for medical expenses, lost wages, and disability benefits for their injured or ill employees. According to the National Safety Council, the average cost of a workers’ compensation claim in the United States was $41,003 in 2019. Additionally, without employee benefits insurance, businesses may face difficulties in attracting and retaining qualified and motivated employees.

The Risks of Not Having Insurance for Society

Not having insurance does not only affect individuals and businesses, but also society as a whole. Some of the risks of not having insurance for society include:

• Social burden: When individuals or businesses do not have insurance, they may rely on public assistance or charity to cope with their losses. This can create a social burden on the government and the taxpayers, who have to fund these programs and services. According to a report by the Kaiser Family Foundation, the uncompensated care cost for uninsured people in the United States was $35.3 billion in 2018. Moreover, uninsured people may also impose external costs on others, such as increased premiums for insured people or increased prices for goods and services.
• Economic instability: When individuals or businesses do not have insurance, they may face financial instability and uncertainty that can affect their consumption, investment, and saving decisions. This can have negative impacts on the economic growth and development of a country. According to a study by the World Bank, natural disasters can reduce GDP growth by an average of 0.6 percentage points and increase poverty by 2.5 percentage points. Furthermore, uninsured individuals or businesses may also face difficulties in accessing credit or capital markets.
• Social injustice: When individuals or businesses do not have insurance, they may face social injustice and inequality that can affect their opportunities and outcomes. For example, uninsured people may face discrimination or stigma in accessing health care, education, or employment. According to a study by the Commonwealth Fund, uninsured adults were more likely than insured adults to report problems getting needed medical care due to cost (62% vs. 21%) and to experience medical bill problems (53% vs. 18%) in 2020. Moreover, uninsured people may also face lower quality of life or well-being.

How to Avoid the Risks of Not Having Insurance

The risks of not having insurance are real and serious, but they can be avoided or minimized by taking some proactive steps. Some of these steps include:

• • Evaluating your needs and risks: The first step is to evaluate your personal and professional needs and risks and determine what types of insurance you need and how much coverage you need. You can use online tools such as calculators or quizzes to help you with this process. You can also consult with an insurance agent or broker who can provide you with expert advice and guidance.
  • Shopping around for the best deal: The next step is to shop around for the best deal that suits your budget and preferences. You can compare different insurance providers, plans, policies, premiums, deductibles, co-payments, benefits, exclusions, and limitations online or offline. You can also look for discounts or incentives that can lower your costs or increase your value.